KUWAIT CITY, Jan 15: Jamal Al-Loughani, Secretary General of the Arab Energy Organization (AEO), formerly known as OAPEC, stated on Wednesday that the decision to tighten U.S. economic sanctions on Russia's energy sector played a significant role in driving oil prices to their highest levels in approximately three months.

In an interview with Kuwait News Agency (KUNA), Al-Loughani explained that Brent crude futures prices rose by 4.2% on a weekly basis by the end of the second week of January, reaching $79.76 per barrel. Meanwhile, U.S. West Texas Intermediate (WTI) crude futures prices increased by 3.5%, reaching $76.57 per barrel. These increases were largely driven by concerns over a potential shortage of Russian oil supplies and a decline in Russian oil exports, which are expected to result in higher costs for major buyers, including India and China.

Al-Loughani noted that the tightening of sanctions is compelling Chinese and Indian refineries to source more oil from the Middle East, Africa, and the Americas. This shift in demand could significantly boost oil prices and raise shipping costs, due to the reduced availability of tankers to transport crude oil from Russia in the near term.

He further pointed out that spot crude oil prices from Middle Eastern, African, and Brazilian countries have already been rising in recent months, coinciding with increased demand from China and India, alongside a decrease in supplies from Russia and Iran.

Al-Loughani also highlighted a recent move by the Chinese Shandong Group, which issued a notice barring oil vessels subject to U.S. sanctions from entering its main ports on China's east coast. This restriction could disrupt the arrival of Russian and Iranian oil imports. As a result, China, the primary buyer of Iranian crude, may increasingly turn to heavy crude oil from the Middle East, and its demand for Canadian crude could rise.

Regarding India, Al-Loughani noted that Indian imports of Russian crude oil are expected to increase by 4.5% in 2024, reaching 1.8 million barrels per day, accounting for about 36% of India's total crude oil imports. Similarly, China's imports of Russian crude oil, including pipeline supplies, are anticipated to rise by 2%, reaching 2.2 million barrels per day, which will make up approximately 20% of China's total imports during the same period.

Al-Loughani emphasized that ongoing global geopolitical tensions could have significant negative effects on global energy markets. An escalation of these tensions may threaten global energy security by disrupting oil and gas supplies, causing sharp price fluctuations, and increasing both production and transportation costs. He warned that these disturbances could also negatively impact the economies of countries heavily reliant on energy imports, further exacerbating global economic and financial crises.

Last Friday, the U.S. imposed a new set of economic sanctions on Russia's energy sector. These sanctions targeted Gazprom and Surgutneftegaz, two of Russia's largest oil producers, and affected over 180 tankers carrying Russian oil, oil traders, oilfield service providers, insurance companies, and energy officials in Russia. Additionally, two active liquefied natural gas (LNG) projects and a major Russian oil project were banned, alongside restrictions on companies supporting Russian energy exports. The sanctions allow companies and traders to conduct certain transactions to settle obligations related to the Russian energy sector until March 12, but prohibit U.S. services related to the extraction and production of crude oil and other petroleum products for Russia from February 27, 2025.