Oil prices hit their highest level in over three months in the Asian market on Monday (January 13), continuing last Friday's gains as the market expects increased US sanctions on the Russian oil industry to suppress Russian supply to China and India; In addition, the strong performance of the US non farm payroll report released last Friday also boosted market confidence in the growth of crude oil demand; Cold weather in some parts of the United States and Europe has also stimulated winter fuel demand.

Brent crude oil futures rose 2.3% at one point, reaching an intraday high of $81.44, the highest since August 27th; US crude oil rose 2.38% to $78.39 per barrel, reaching a new high since October 8th.

The Biden administration announces the strictest sanctions against Russian oil to date

The Biden administration in the United States implemented the most extensive package of sanctions against Russia's oil and gas revenues last Friday, aimed at giving Kiev and Trump's new team the influence to reach a peace agreement in Ukraine.

This move aims to reduce Russia's source of income for continuing this war. Since the Russia-Ukraine conflict in February 2022 in Russia, the war has caused tens of thousands of casualties and turned many cities into ruins.

Ukrainian President Zelensky stated in an article on X that the measures announced last Friday will have a "significant impact" on Moscow. He added, "The less income Russia earns from oil... the faster peace can be restored

US Deputy National Security Advisor for International Economic Affairs, Singh, stated in a statement that these measures are "the most significant sanctions to date on Russia's energy industry, which is the largest source of income for President Putin's war effort.

The US Treasury Department stated that sanctions have been imposed on Gazprom Neft and Surgutneftegas, two Russian companies responsible for exploring, producing, and selling oil, as well as on 183 ships that have transported Russian oil, many of which belong to the Black Fleet, which are old oil tankers operated by non Western companies. The sanctions also include the oil trade network.

The Ministry of Finance has also lifted the previous provision that exempted energy payment intermediaries from sanctions against Russian banks.

Singh said that the logic of sanctions is to strike every link in Russia's oil production and distribution chain. Another US official told reporters over the phone that if sanctions are fully implemented, Russia will lose billions of dollars every month.

This round of sanctions targets oil producers, tankers, intermediaries, traders, and ports.

The official said, "There is no link in the production and distribution chain that is not affected, which gives us more confidence that evading sanctions will make Russia pay a greater price

The US Treasury Department will set a deadline before March 12th to allow sanctioned entities to complete energy related transactions. Sources from Russia's oil trade and India's refining industry say that sanctions will cause significant disruption to Russia's oil exports to its main buyers India and China.

Gazprom stated that the sanctions are unreasonable and illegal, and the company will continue to operate.

One of the Biden administration officials stated that it is entirely up to President elect Trump, who will take office on January 20th, to decide when and under what conditions to lift the sanctions imposed during the Biden era.

One of the officials stated that military aid and oil sanctions have greatly enhanced the influence of the next government and Ukraine in promoting a just and lasting peace.

Traders and analysts say that due to new sanctions imposed by the United States on Russian producers and ships, supply to Moscow's most important customers has been restricted. Asian powers and Indian refineries will purchase more oil from the Middle East, Africa, and the Americas, thereby pushing up prices and shipping costs.

In a video posted on social network X, Anas Alhajji, Managing Partner of Energy Outlook Advisors, said, "India and major Asian countries (now) are racing to find alternatives

UBS analyst Giovanni Staunovo said that sanctions will reduce Russia's oil exports and make oil prices more expensive.

Harry, Head of Research at Onyx Capital Group? The latest round of sanctions against Russian oil companies and a large number of oil tankers will have a significant impact, especially on India, "said Qilingilian

US employment growth unexpectedly accelerates and unemployment rate drops in December

Unexpectedly, employment growth in the United States accelerated in December, with the unemployment rate dropping to 4.1%. The labor market remained stable at the end of the year, which will drive up demand for crude oil..

The highly anticipated employment report released by the Ministry of Labor on Friday also showed a decrease in long-term unemployment in December and a shortened median duration of unemployment. These indicators have previously raised concerns about the deterioration of the labor market.

This report is a masterful demonstration of labor market resilience, "said Scott Anderson, Chief US Economist for Capital Markets at Montreal Bank." Steady non farm employment growth and decent income growth will keep the US economy on a solid foundation for expansion at the beginning of this year, which is likely to keep the Federal Reserve on the sidelines at its January meeting. "

The US Bureau of Labor Statistics stated that non farm payroll jobs increased by 256000 in December, the highest since March. The revised data for October and November shows that there were 8000 fewer new job opportunities than previously reported.

Economists previously predicted that 160000 new jobs would be created in December, with specific estimates ranging from 120000 to 200000. In the last year of President Biden's term, the economy created 2.23 million jobs, equivalent to an average of 186000 new jobs added per month. Although it is lower than the increase of 3 million in 2023, the employment growth rate is consistent with that of 2018.

In December, not only did non cyclical industry employment growth occur, but even retail employment rebounded, although the late Thanksgiving holiday boosted recruitment to some extent.

After a 0.4% month on month increase in November, the average hourly wage increased by 0.3% in December. The average hourly wage in December increased by 3.9% year-on-year, and the increase in November was 4.0%. The average weekly working hours remain unchanged at 34.3 hours. The total revenue increased by 0.4%. The seasonally adjusted annualized growth rate of labor income in the fourth quarter was 5.9%, the highest since the third quarter of 2023.

The unemployment rate has decreased from 4.2% in November. The average unemployment rate was 4.0% last year, and 3.6% in 2023. In Friday's report, the government also released revisions to seasonally adjusted household survey data for the past five years, based on which the unemployment rate was calculated.

Analyst's viewpoint

Ole Hansen, head of commodity strategy at Shengbao Bank, said: 'There are several driving factors in the market. In the long run, the market is focused on the prospect of additional sanctions. In the short term, the extremely cold weather across the United States is driving demand growth.'.

PVM analyst Tamas Varga said that existing and potential further sanctions, as well as market expectations of inventory reduction due to cold weather, are driving up oil prices.

Morgan Stanley analysts believe that the reason for the rise in Brent crude oil futures prices is due to growing concerns about supply disruptions caused by tightening sanctions, as oil inventories remain low, severe weather in many parts of the US and Europe improves, and views on stimulus measures from Asian powers improve.

Morgan Stanley said in a report on Friday, "We expect global oil demand to increase significantly by 1.6 million barrels per day year-on-year in the first quarter of 2025, mainly driven by demand for heating oil, kerosene, and liquefied petroleum gas

This week's outlook: Focus on US inflation, speeches by Federal Reserve officials, and data from China

With the dust settling on last Friday's employment data, this week will see a large amount of US data and speeches from Federal Reserve officials. It is expected that President elect Trump's team will make a large number of comments before the inauguration ceremony on January 20th. China's trade, economic activity, and GDP data will also be the focus of attention.

Important data for the United States include December PPI (Tuesday), CPI (Wednesday), retail sales (Thursday), and industrial production (Friday). Data on initial jobless claims and housing starts for the week in the United States will also be released one after another. In addition, the Federal Reserve will release a brown book. Federal Reserve officials Kanschmidt, Williams, Gulsby, Barkin, and Kashkari will deliver speeches.

China will release December trade data on Monday, and on Friday it will release fourth quarter and 2024 GDP, as well as industrial value added, retail sales, investment, and housing price data. Social finance data is also expected to be released this week.

Japan will remain calm this week, only releasing November's current account and trade data, as well as December's domestic corporate price index (CGPI). Vice President of the Bank of Japan, Ryozo Shimino, will deliver a speech on Tuesday.

In terms of the Eurozone, the final value of the December Harmonized Index of Consumer Prices (HICP), November trade balance and industrial production data, as well as Germany's 2024 GDP data, will be released successively.

The UK has a busy schedule and will release December CPI, RPI, PPI and retail sales, November GDP and manufacturing output. Taylor, a member of the Monetary Policy Committee of the Bank of England, will give a speech on the inflation situation and economic outlook.

The December employment data released by Australia on Thursday will affect the policy expectations of the Reserve Bank of Australia. New Zealand will release the fourth quarter NZIER confidence index and food inflation data.

Canada will only release housing construction and trade data, but the political situation may become the focus after Prime Minister Trudeau decides to resign. Vice President of the Bank of Canada, Gladwell, will give a speech on the normalization process of the bank's balance sheet.