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International oil prices continue to rise as western countries escalate sanctions against Russia and fears of supply cuts

2022-03-03

Oil futures rose sharply on Tuesday, with London's Main brent contract closing above $100 a barrel for the first time since Sept. 8, 2014, as concerns about supply disruptions in Russia grew over Ukraine and sanctions against Moscow.

By the end of the day, light crude for April delivery rose $4.13, or 4.51%, to settle at $95.72 a barrel on the New York Mercantile Exchange. London Brent crude for April delivery rose $3.06, or 3.12%, to settle at $100.99 a barrel.

The United States, France, Germany and the European Commission decided to exclude Some Russian banks from the SWIFT system and impose restrictions on the Russian Central bank to prevent it from allocating international reserves to mitigate the impact of the sanctions, the White House said in a statement February 26. The European Union and Canada have announced the closure of their airspace to Russia.

Despite efforts to avoid the impact of sanctions on Russia on the energy market, the risk of disruption to oil and gas shipments is rising, according to a report by Everco International Strategy and Investment Group.

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Mark Heifer, global chief investment officer at UBS Wealth Management, said that while western sanctions have so far not directly targeted Russian commodity exports, the position is shifting fast, with the White House saying sanctions targeting Russian energy remain an option.

Recently, Russian oil and gas sales in international markets have already faced difficulties due to sanctions and uncertainty. John Kilduff, founding partner of Reinvestment Capital Management, said the sanctions against Russian banks are making it highly difficult to sell Russian oil.

Data show that Russia supplies about 10 percent of the world's crude oil, and its Urals crude is the largest oil product on the European market.

Bob McNally, president of Lapidan Energy Consulting, said the apparent escalation of the situation in Ukraine over the weekend had pushed crude risk premiums higher again, with prices likely to reach $100 to $115 a barrel before easing.

Goldman Sachs group Inc. recently raised its forecast for the average price of Brent crude oil to $115 a barrel from $95.

The Wall Street Journal reported on February 28 that the United States and some major oil consumers are considering a joint release of 70 million barrels of strategic crude oil reserves.

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