(Bloomberg) Oil was rising for the third day as the war in Ukraine is about to complete a month without a conclusion in sight, exacerbating supply concerns over the loss of Russian crude oil.
Futures in New York advanced by up to 6.5% to trade close to US$110 per barrel, while Brent was around US$115. Several European Union countries are pushing for a fifth round of sanctions against Russia, although some remain opposed to including oil among the measures. The Kremlin said that an EU ban on oil imports from Russia would have a profound effect on the global crude market and would affect the continent the most.
In previous weeks, an EU sanction on Russian oil “seemed unrealistic given its dependence on Russian energy supply,” said Rohan Reddy, research analyst at Global X Management, a firm that manages $2 billion in energy-related assets. “Basically, it would eliminate 4%-5% of the world's oil supply.”
The world oil market has been plunged into turbulence due to Russia's invasion of Ukraine, with the imposition of sanctions by the United States and Europe on Moscow and the rejection of crude oil buyers from the country's shipments.
Brent approached US$140 per barrel this month to hit the highest level since 2008, before suffering a sharp pullback that put the market briefly into bearish territory. Prices have experienced unprecedented volatility, with frequent intraday fluctuations of around US$10 and commodity markets generally in turmoil amid a widespread liquidity crisis.
The rebound in oil prices has prompted importing countries to pressure other producers to increase supply, including members of the Organization of the Petroleum Exporting Countries. Saudi Arabia said it cannot be held responsible for the drop in oil production if it does not receive more help to deter Yemen's attacks. Houthi rebels attacked at least six facilities throughout Saudi Arabia over the weekend, including some operated by Aramco. Saudi Arabia has faced calls from oil-consuming nations, such as the US, for increased supply production.
Amid calls for increased production, Rystad Energy forecasts that 2 million barrels per day of world oil demand could be lost this year due to war, sanctions and inflation. This would return consumption to pre-pandemic levels.
The Biden Administration is intensifying its response to the Russian invasion. Later on Monday, officials will brief energy companies, including ExxonMobil Corp., as well as banks, about the war and the ensuing sanctions. On the other hand, President Joe Biden plans to call his counterparts in Europe before traveling to the region later this week.
As the war continues, the world's three largest oilfield service providers are reducing their jobs in Russia. On Saturday, Baker Hughes Co. reported that it will suspend further investments in operations in the country. This followed a similar statement by Schlumberger on Friday. Halliburton Co., the leading provider of fracking services, suspended current and future work in the country.
Original Note:
Oil Surges With Growing Supply Fears as EU Considers Russian Ban
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