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Oil prices settled around 4% higher on Tuesday as the United States banned Russian oil imports and Britain said it will phase them out by year end, decisions expected to further disrupt the global energy market where Russia is the second-largest exporter of crude.
Oil prices have surged more than 30% since Russia invaded Ukraine, and the United States and other countries imposed a raft of sanctions. Russian oil and gas exports were already upended before the ban, as traders sought to avoid running afoul of future sanctions.
U.S. President Joe Biden announced a ban on Russian oil and other energy imports. Britain said it will phase out the import of Russian oil and oil products by the end of 2022, giving the market and businesses time to find alternatives. Brent crude futures settled at $127.98 a barrel, 3.9% higher, while U.S. crude futures settled at $123.70 a barrel, a 3.60% increase.
Russia ships 7 million to 8 million barrels per day of crude and fuel to global markets.
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On Monday, the possibility European allies would join the United States in banning Russian crude had sent oil to 14-year highs. However, U.S. Energy Secretary Jennifer Granholm said after the sanctions announcement that allies were not under pressure to ban Russian oil.
“We don’t rely that much on Russian oil and we don’t rely on Russian gas at all. We know that our allies across the world may not be in that same position. And so we are not asking them to do the same thing,” Granholm told CNBC in an interview.
Despite the small size of U.S. imports from Russia, the ban is “one more source of supply loss,” said Matt Smith, lead oil analyst at Kpler. “It’s just one more escalation in a series of events that have pushed crude and product prices higher,” Smith added.
Before the ban was announced, Goldman Sachs had raised its Brent forecast for 2022 to $135 from $98 and its 2023 outlook to $115 a barrel from $105, saying the world economy could face the “largest energy supply shocks ever” because of Russia’s key role.
“How high can oil prices go? Pick a number, this is a market in disarray,” Mike Tran, analyst at RBC Capital Markets, said in a note. Many buyers were already avoiding Russian oil. Shell PLC said it would stop all spot purchases of Russian crude after drawing criticism for a purchase made on March 4.
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Expectations have dimmed for an imminent return of Iranian crude to global markets, adding upward pressure on prices as talks have slowed between Tehran and world powers. The supply disruptions have prompted widespread calls for higher output from oil producers.
Mustafa Sanalla, head of Libya’s state-run National Oil Corp, said the country’s production is currently 1.3 million barrels per day and will reach 1.5 million barrels by year-end.
API data showed a surprise increase of 2.8 million barrels in U.S. crude stocks for the week ended March 4, according to sources. “I don’t think it will have any impact on prices… It is easily overshadowed by day-to-day developments in the Ukraine” said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)
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