RoydadNaft –  Oil prices dipped in early trade on Friday, trimming part of the previous day’s surge but remaining on track for a weekly gain, as fresh U.S. sanctions on Russia’s two biggest oil companies over the war in Ukraine fuelled supply concern.

Brent crude futures were down 41 cents, or 0.62%, at $65.58 at 0653 GMT. U.S. West Texas Intermediate crude futures fell 38 cents, or 0.61%, to $61.41.

“Crude is levelling off, some profit-taking is setting in, indicating the market is not hitting the panic button over Russian supply,” said Vandana Hari, founder of oil market analysis provider Vanda Insights.

“It is likely to be wait-and-watch mode, until the next twist in the saga, that could be an escalation or a de-escalation,” Hari said. “Looks like the market is betting on the latter.”

Both benchmarks jumped more than 5% on Thursday and were set for about a 7% weekly gain, the biggest since mid-June.

Six-month spreads for Brent and U.S. crude futures returned to backwardation – when contracts for later loading fall below those for earlier loading – having briefly been in contango this week.

That indicates a shift among trader concerns from over-supply to under-supply, allowing them to sell at near-month higher prices instead of paying for storing oil for future sale.

US SANCTIONS TWO MAJOR RUSSIAN OIL SUPPLIERS

“Flows to India are at risk in particular… Challenges to Chinese refiners would be more muted, considering the diversification of crude sources and stock availability,” Janiv Shah, a vice president of oil markets analysis at Rystad Energy, said in a client note.

Russia was the world’s second-biggest crude oil producer in 2024 after the U.S., U.S. energy data showed.