Oil prices raised their gains by more than 4% in Tuesday’s trading, with Brent crude rising above $129, amid fears of official sanctions on Russian oil and fuel exports, raising concerns about the availability of supplies.
On Monday, oil prices ended more than 4% higher, trimming their gains after touching the highest level since July 2008, hovering near $140 a barrel.
Oil Prices Today
The price of futures contracts for West Texas Intermediate crude – for delivery in April – rose by 4%, to reach $ 124.72 a barrel.
The prices of Brent crude futures contracts – for delivery in May 2022 – also rose by 5%, recording 129 dollars per barrel.
Russia is the world’s second largest oil exporter, shipping about 7 million barrels per day of crude and oil products combined.
Russian Oil Exports
Sources revealed Monday that the United States, the world’s largest oil consumer, may move unilaterally to ban Russian oil imports in response to the Russian invasion of Ukraine.
However, Germany, the largest buyer of Russian crude oil, rejected plans to impose an energy embargo, replacing the massive amounts of Russian fuel and oil in the market, if it raised supply concerns from oil traders, sending prices higher.
“The ban on Russian oil exports of around 7 million barrels per day of crude oil and petroleum products is a big reason for another expected rise in oil prices,” said Ventura Securities’ head of commodities, NS Ramswami.
He added that until a decision to impose sanctions on Russian oil exports is issued, oil prices will trade between $125 and $130.
A senior US official, who spoke on condition of anonymity, told Reuters on Monday that no final decision had been made, but “it is likely that the United States will be alone if that happens.”
Russia’s halting of its energy exports in response to the imposed sanctions has also pushed up prices.
Russia warned on Monday that it could stop the flow of natural gas through pipelines from Russia to Germany in response to Berlin’s decision last month to halt the opening of the controversial new Nord Stream 2 pipeline.
Russian Deputy Prime Minister Alexander Novak said that oil could rise to more than $300 if all Russian oil exports are banned from world markets, while analysts expect prices to rise to $200 a barrel.
For his part, the Secretary-General of the Organization of Petroleum Exporting Countries (OPEC), Muhammad Barkindo, said at an energy conference in Houston on Monday: “There is no energy in the world at the moment that can replace 7 million barrels of exports.”
Two Australian refiners, Viva Energy and Ampol Ltd., announced that they had stopped buying Russian crude after Moscow’s invasion of Ukraine.
Oil prices were also supported by an apparent slowdown in talks with Iran over its nuclear program, which will end sanctions on its oil sales, after the European Union’s envoy on the talks said it was up to Iran and the United States to make political decisions to reach an agreement.
“The delay in lifting sanctions on Iranian oil is causing a lot of tension in the market,” said Suganda Sachdeva, vice president of commodity and currency research at Religar Brokeing.
The oil supply disruptions come as inventories continue to fall worldwide, with 5 analysts polled by Reuters, on average, estimating that US crude stocks fell by about 800,000 barrels in the week to March 4.
The survey was conducted ahead of the weekly inventory reports from the American Petroleum Institute, which is expected to be released on Tuesday, and official data from the US Energy Information Administration on Wednesday.
Novak: Oil prices will exceed $ 300 a barrel in this case
Russian Deputy Prime Minister Alexander Novak sent a strongly worded message to the West and Europe, that oil prices will continue to rise to unprecedented record levels.
He said – in statements that were few said, reported by the Russian TASS news agency – that crude prices may exceed $300 a barrel, in the event of a ban on oil imports from Moscow.
Alexander Novak warned of what he called the “catastrophic consequences” that would befall the global market, if the United States and Western countries took sanctions up to the Russian oil embargo.
Oil And Gas Supplies Affected
Russia accounts for about 11% of the world’s crude oil production, and supplies about a third of natural gas to Europe, including through pipelines through Ukraine.
Europe is increasing its use of LNG, as an alternative to pipeline gas from Russia; Intensifying competition for uncontracted shipments of supercooled fuels.
Even before the Russian invasion of Ukraine, tight global supplies of oil, gas and coal led to an energy crisis across the northern hemisphere; However, the war in Ukraine pushed up prices.