Ukraine crisis: Oil prices surge as US and Britain cut off Russian crude

Britain said it will phase out the import of Russian oil and oil products by 2022


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Reuters  | 

Oil prices surged on Tuesday as the United States and Britain moved to ban Russian oil imports, a decision that is expected to worsen disruptions in the global energy market as Russia is the second-largest exporter of crude.

“How high can oil prices go? Pick a number, this is a market in disarray,” said Mike Tran, analyst at RBC Capital Markets, in a note early on Tuesday.

Benchmark Brent crude for May shot up $7.55, or 6.1%, to $130.76 a barrel by 10:56 a.m. EST (1556 GMT). US crude for April delivery was up $7.38, or 6.2%, at $126.78 a barrel.

Britain said it will phase out the import of Russian oil and oil products by 2022.

The import ban by Europe and the United States on Russian oil could send global oil prices spiralling up to $200 a barrel, analysts at Oslo-based consultancy Rystad Energy said.

Many buyers are already avoiding Russian oil so as not to become entangled in existing sanctions.

Shell said it would stop all spot purchases of Russian crude after drawing criticism for a purchase on March 4.

Goldman Sachs raised its Brent forecast for 2022 to $135 from $98 and its 2023 outlook to $115 a barrel from $105, saying that the world economy could face the “largest energy supply shocks ever” because of Russia’s key role.

Dimming expectations for an imminent return of Iranian crude to global markets have added to upward pressure on prices amid a slowdown in talks between Tehran and world powers over its nuclear activity.

Oil supply disruptions come as inventories continue to fall worldwide. Five analysts polled by Reuters estimated on average that U.S. crude stockpiles decreased by about 800,000 barrels in the week to March 4.

The poll was conducted before weekly inventory reports from the American Petroleum Institute on Tuesday and the U.S. Energy Information Administration on Wednesday.

Media reports about the International Energy Agency’s readiness to release more oil from emergency stockpiles had no impact on the rally.

“Ultimately, the IEA is not announcing significant action,” said Craig Erlam, senior market analyst at OANDA. “In this market, words are not going to have an impact.”

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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