Oil jumps after settlement on new US sanctions on Russian oil companies

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Oil prices extended gains after settlement on Wednesday, rising by more than $2 a barrel after the United States imposed sanctions on major Russian oil companies Rosneft and Lukoil.

The U.S. said it was also prepared to take further action as it called on Moscow to immediately agree to a ceasefire in Russia's war in Ukraine. "We encourage our allies to join us in and adhere to these sanctions," Treasury Secretary Scott Bessent said in a statement.

Brent crude futures extended gains after settlement, rising $2.65, or 4.32%, to $63.97 by 5:12 p.m. EDT (2112 GMT) and U.S. West Texas Intermediate crude futures were up $2.14, or 3.74%, to $59.38.

Brent futures settled $1.27, or 2.07%, higher at $62.59 a barrel, while U.S. West Texas Intermediate crude futures climbed $1.26, or 2.20%, to $58.50.

Oil prices were also supported by growing U.S. energy demand.

U.S. crude oil, gasoline and distillate inventories fell last week as refining activity and demand strengthened, the Energy Information Administration said on Wednesday. [EIA/S]

Crude stocks fell by 961,000 barrels to 422.8 million barrels last week, compared with analysts' expectations in a Reuters poll for a 1.2 million-barrel rise.

"Very impressive for shoulder season," said Phil Flynn, senior analyst with Price Futures Group. "It shows the demand side of the equation of oil is robust, and the supply numbers are not suggesting this oil glut, at least here in the U.S."

Investors were also closely watching the progress of U.S.-China trade talks as officials from both countries are set to meet this week in Malaysia.

U.S. President Donald Trump said on Monday he expected to work out a fair trade deal with Chinese President Xi Jinping, whom he was due to meet in South Korea next week. On Tuesday, however, Trump again added to uncertainty over the meeting, saying it might not happen.

Supply concerns flared on news that a summit between Trump and Russian President Vladimir Putin had been put on hold, and on disruption fears as Western governments pressured Asian buyers to reduce their purchases of Russian oil.

Trump said he spoke with Indian Prime Minister Narendra Modi on Tuesday, adding that Modi assured him India would be limiting its oil purchases from Russia.

"Oil prices climbed after reports suggested the U.S. and India are close to finalising a trade deal that could see India gradually cut imports of Russian crude, potentially lifting demand for other grades," MUFG analyst Soojin Kim said.

India's Mint newspaper reported on Wednesday that the two countries were nearing a long-stalled trade agreement that would reduce U.S. tariffs on Indian imports to 15-16% from 50%.