Oil prices fell on Friday (October 24th) as skepticism crept into the market regarding the Trump administration's commitment to sanctions against Russia's two largest oil companies related to the war in Ukraine.

Brent crude futures closed 5 cents, or 0.1%, lower at $65.94 a barrel, while U.S. crude <CLc1> closed at $61.50 a barrel, down 29 cents, or 0.5%.

Both crude benchmarks rallied early in the session, extending gains of more than 5% achieved on Thursday after the sanctions were announced, but then weakened in the final two hours of trading. Crude prices still closed up more than 7% at the end of the week, their biggest weekly gain since mid-June.

"There's renewed skepticism that these sanctions will be as harsh as they've been reported," said John Kilduff, partner at Again Capital LLC. US President Donald Trump imposed sanctions on Russian oil company Rosneft (ROSN.MM) and Russian oil company Lukoil (LKOH.MM) to pressure Russian President Vladimir Putin to end the war in Ukraine.

The two companies together account for more than 5% of global oil production, and Russia is expected to be the world's second-largest crude producer by 2024, after the US. The sanctions have prompted major Chinese state-owned oil companies to suspend purchases of Russian oil in the short term, trade sources told Reuters. Oil refiners in India, the largest buyer of Russian seaborne oil, will sharply cut imports of Russian crude, industry sources said.

"Flows to India are particularly at risk," said Janiv Shah, vice president of oil market analysis at Rystad Energy, in a client note. "The challenge for Chinese refiners will be less, given the diversification of crude sources and the availability of stocks."

Kuwait's oil minister said that the Organization of the Petroleum Exporting Countries (OPEC) would be ready to offset market shortages by increasing production. The US has expressed readiness to take further action, while Putin has derided the sanctions as unfriendly, saying they will not significantly impact the Russian economy and emphasizing Russia's importance to global markets.

The UK imposed sanctions on Rosneft and Lukoil last week, while the European Union approved its 19th package of sanctions against Russia, including a ban on imports of Russian liquefied natural gas. The EU also added two Chinese refineries with a combined capacity of 600,000 barrels per day, as well as Chinaoil Hong Kong, a subsidiary of PetroChina's trading arm, to its sanctions list for Russia, its official journal reported on Thursday.

Looking ahead, investors are also focused on the meeting between Trump and Chinese President Xi Jinping next week, as the two seek to defuse long-running trade tensions and end a series of retaliatory measures. (alg)

Source: Reuters