WTI rebounds from five-month low as US sanctions on Russia jolt market
WTI crude staged a sharp reversal this week, climbing from a five-month low after the US announced sweeping sanctions on Russia’s top oil producers. The WTI prompt-month contract rose $3.96 week-over-week to settle at $61.50/Bbl on Friday, as traders priced in renewed geopolitical risk after earlier weekly declines.
Crude prices opened at $57/Bbl on Monday, the lowest since May, amid signs that supply growth continues to outpace demand. The IEA’s latest Oil Market Report projected a widening surplus approaching 4 MMBbl/d in early 2026, driven by the unwinding of OPEC+ voluntary cuts and new output from non-OPEC countries. Despite optimism around upcoming US–China trade talks, fundamentals remained heavy, keeping bearish sentiment intact through midweek.
Momentum shifted on Wednesday after reports that India was preparing to scale back Russian crude purchases as part of a potential US–India trade deal. The prospective agreement, which would reduce tariffs on Indian exports in exchange for a phased wind-down of Russian oil imports, signaled growing diplomatic coordination ahead of an expected EU sanctions vote.
The real inflection came Thursday when Washington blacklisted Russian state-owned Rosneft and Lukoil, sending WTI prices up over $3/Bbl intraday. Analysts at Rystad Energy estimate 500–600 MBbl/d of Russian output could be curtailed, forcing Moscow to rely more heavily on shadow tanker fleets and Chinese buyers.
Despite the late-week rally, underlying fundamentals remain unchanged. OPEC+ supply recovery, record US production, and elevated crude-on-water volumes continue to point toward a structurally oversupplied market heading into 2026. The rebound was driven primarily by renewed geopolitical risk rather than a shift in physical balances. Any sustained price strength will depend on how aggressively India enforces reductions and whether Russia can reroute displaced barrels to China or other buyers.
This week’s developments highlight the market’s ongoing tension between oversupply and geopolitical volatility. While Russian barrels could indeed fall from the market under the new sanctions, the extent of any disruption remains uncertain, and it may take time to gauge how material the impact truly is. For producers, the rally offers an opportunity to layer in incremental hedges or extend existing positions at improved strike levels. With the structural surplus still intact and agency forecasts pointing to continued inventory builds into 2026, upside driven by geopolitical risk is likely to be temporary. AEGIS maintains a bearish outlook, viewing the week’s rally as a window to manage price exposure rather than a durable shift in fundamentals.