Oil has jumped as traders feared a disruption in Russia’s energy industry

An oil-pumping jacket, also known as a “gesturing donkey,” on an oil field near Dyurtyuli in the Republic of Bashkortostan, Russia, on Thursday, November 19, 2020.

Andrey Rudakov | Bloomberg | Getty Images

Oil prices rose in early Monday after US and Western allies imposed sanctions on specific Russian banks, raising fears that the power supply would be indirectly affected.

Crude Brent, an international oil benchmark, rose 7% to $ 105 a barrel. The future of West Texas Intermediate crude, the U.S. benchmark, earned up to 7% to trade at more than $ 98 per barrel.

Prices then dropped slightly. WTI rose 5.03% to $ 96.20 per barrel, while Brent gained 4.78% to trade at $ 102.61 per barrel.

The two contracts broke more than $ 100 on Thursday since 2014 after Russia invaded Ukraine. However, the initial rise was relatively short-lived as the WTI and Brent withdrew throughout Thursday’s session and the first round of White House sanctions in Friday’s negotiations were not targeted by Russia’s energy system.

At the time, traders thought the market was out of the woods due to a major supply disruption, but over the weekend there was a “significant climb” which returned the risk premium in prices, according to Bob McNally. , President of Rapidan Energy Group.

The decision to remove some Russian banks from the global interbank messaging system has been announced by the Society for the Worldwide Interbank Financial Telecommunication (SWIFT), which has imposed measures on Russia’s central bank to prevent its establishment, and Russian President Vladimir Putin has imposed nuclear deterrents. high alert.

“We could go for $ 110 or $ 115 a barrel before we go back,” he told CNBC’s Street Signs Asia on Monday.

New measures announced

On Saturday, the US, European allies and Canada said they would disconnect specific Russian banks from SWIFT.

“This will ensure that these banks are disconnected from the international financial system and that their ability to act on a global scale is undermined,” the global powers said in a joint statement announcing the retaliatory measure.

Russia is a major supplier of oil and gas, especially to Europe. Although the latest round of sanctions does not focus on energy, experts say it will have a significant impact.

“Various bank sanctions make it very difficult for Russian oil sales to happen now,” said John Kilduff, a partner at Again Capital. “Most banks will not provide basic financing because of the risk of exceeding penalties.”

Putin could also decide to retaliate against US and allied action by arming himself with power and shutting off taps directly.

“[W]I believe that Western companies may decide that it is not worth the risk to continue doing business with Russia, given the uncertainty surrounding enforcement and the trajectory of future coercive actions, “RBC said in a statement to customers on Sunday.

OPEC meeting

OPEC and its oil-producing allies, including Russia, will meet this week to determine the group’s production policy for April. The oil alliance is increasing production by 400,000 barrels a month, removing the historic production cuts of nearly 10 million barrels that were imposed in April 2020 when the pandemic intensified in April 2020.

The group, as well as producers around the world, including the United States, have kept their oil supply under control as demand picks up. Oil prices are steadily rising, a catalyst that pushed the gross invasion of Russia above $ 100.

Consumers are feeling the effects of higher pump prices. According to AAA data, the national average of $ 3.60 a liter of gasoline was on Sunday. The White House has said it is working to reduce the burden on Americans.

“While sanctions are still being worked out to prevent energy price spikes, we believe this aggressive but non-maximalist stance has not been sustainable as disruptions to oil and gas shipments are becoming increasingly unavoidable,” Evercore ISI wrote in a note to customers. .

“Russia is casting a long, dark, unpredictable and very complicated shadow. The biggest potential negative for the US economy is the rise in oil prices,” the company added.

Oil has jumped as traders feared a disruption in Russia’s energy industry

Source link Oil has jumped as traders feared a disruption in Russia’s energy industry

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