Oil prices edged lower in early Friday trading, easing slightly after Thursday’s strong rally but remaining poised for their biggest weekly gain in four months.
Fresh U.S. sanctions targeting Russia’s two largest oil producers have heightened concerns about global supply stability, keeping crude markets volatile.
Market Movement
Brent crude oil, against which Nigerian crude oil is priced, slipped $0.41, or 0.62% to $65.58 per barrel, while U.S. West Texas Intermediate (WTI) declined $0.38, or 0.61% to $61.41 at 07:53 a.m.
Both benchmarks surged by more than 5 percent on Thursday and were set for about a 7 percent weekly rise, marking their strongest performance since mid-June.
Market analysts said the mild pullback reflects short-term profit-taking rather than a reversal of sentiment.
“Crude is levelling off, some profit-taking is setting in, indicating the market is not hitting the panic button over Russian supply,” said Vandana Hari, founder of energy research firm Vanda Insights.
Hari noted that traders have adopted a “wait-and-watch” stance as they weigh the potential escalation—or possible de-escalation—of geopolitical tensions surrounding Moscow’s oil sector.
U.S. Sanctions Deepen Supply Risks
The United States imposed new sanctions on Rosneft and Lukoil on Thursday, seeking to pressure Russia to end its war in Ukraine. Together, the two companies account for over 5 percent of global oil output, making the move one of Washington’s most far-reaching measures yet against the Russian energy industry.
Following the announcement, Chinese state refiners temporarily suspended Russian oil purchases, while Indian refiners, among the largest buyers of seaborne Russian crude, signalled plans to sharply reduce imports.
“Flows to India are at risk in particular,” said Janiv Shah, Vice President for Oil Markets at Rystad Energy, noting that Chinese refiners may be less affected due to diversified supply options and strong stock levels.
Market Structure Shifts to Backwardation
The six-month spreads for Brent and WTI futures reverted to backwardation—when near-term contracts trade at higher prices than later-dated ones—after briefly moving into contango earlier in the week.
This reversal signals traders’ growing focus on immediate supply shortages, with tighter near-term pricing suggesting a market leaning toward deficit rather than surplus.
OPEC Response and Global Reactions
Kuwait’s oil minister stated that OPEC and its allies are ready to raise production if necessary to offset any disruption caused by the sanctions.
In contrast, Russian President Vladimir Putin dismissed the latest U.S. measures as “unfriendly acts,” insisting they would not significantly damage Russia’s economy while underscoring the country’s strategic role in global energy supply.
The White House signalled readiness for additional punitive steps should Moscow fail to comply with diplomatic demands. Meanwhile, the United Kingdom and European Union broadened their own restrictions, with the EU introducing its 19th package that includes a ban on Russian liquefied natural gas and adds two Chinese refiners plus Chinaoil Hong Kong, a PetroChina affiliate, to its sanctions list.
Investor Focus: U.S.–China Diplomacy
Beyond sanctions, market participants are monitoring next week’s scheduled meeting between President Donald Trump and Chinese President Xi Jinping, as both leaders attempt to ease long-standing trade tensions.
Any progress could temper volatility and support demand sentiment across global commodities.
Outlook
Analysts expect crude to trade within a volatile but upward-biased range as supply risks remain elevated.
Ongoing geopolitical uncertainty, combined with OPEC’s response capacity and the pace of Russian export adjustments, will continue to dictate short-term direction.
For now, traders remain cautious but optimistic, balancing geopolitical shocks against improving demand fundamentals that could keep prices firm through year-end.