October 21, 2025
Oil Prices Surge On Ukrainian Drone Threat, Expanded Russian Sanctions Fears
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Oil Prices Surge On Ukrainian Drone Threat, Expanded Russian Sanctions Fears


Oil prices are surging this morning as the market is caught in a “tug-of-war” between bearish fundamentals and heightened geopolitical risks (as Citigroup put it).

“The volatility reflects the market’s ongoing struggle to balance growing surplus risks against persistent geopolitical uncertainty and resilient refined product margins,” said Ole Hvalbye, a commodities analyst at SEB AB.

“Sentiment remains broadly cautious.”

Crude rallied initially on mounting fears that Ukrainian drone attacks may disrupt flows through Russia’s two most important crude-exporting hubs on the Baltic coast.

The strikes have suspended operations at Primorsk, the main oil-loading port in the region, as well as three pumping stations pushing crude to the Ust-Luga hub, a person familiar with the situation said.

The gains extended further on reports that the Trump administration will urge its allies in the Group of Seven to imposes tariffs as high as 100% on China and India for their purchases of Russian oil in an effort to convince President Vladimir Putin to end his war in Ukraine.

The US proposal calls for 50% to 100% secondary tariffs on China and India as well as restrictive trade measures on both imports and exports to curb the flow of Russian energy and to prevent the transfer of dual-use technologies into Russia, according to the proposal.

President Trump has told European officials he’s willing to impose sweeping new tariffs on India and China to push Putin to the negotiating table with Ukraine – but only if nations in Europe do so as well.

Trump’s suggestion comes after his deadline for Putin to hold a bilateral meeting with Ukraine’s Volodymyr Zelenskiy passed without indication that the Russian leader was genuinely interested in engaging in face-to-face peace talks.

Instead, Moscow has stepped up its Ukraine bombing campaign.

As Bloomberg reports, the heightened risk premium offset an International Energy Agency projection for a record oil supply surplus next year.

A more pessimistic report from the agency on Thursday followed a decision by OPEC+ to keep returning idled barrels to the market in October, albeit at a lower rate than previous hikes.

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