U.S. benchmark oil futures posted their highest finish in more than 13 years on Monday, briefly reaching highs above the $130 mark, as momentum builds for a ban on Russian oil imports.
Secretary of State Antony Blinken said Sunday the U.S. was considering an embargo of Russian oil imports “in coordination” with European and NATO allies in response to Moscow’s unprovoked invasion of Ukraine.
West Texas Intermediate crude for April delivery
rose $3.72, or 3.2%, to settle at $119.40 a barrel on the New York Mercantile Exchange, the highest front-month contract finish since September 2008, according to Dow Jones Market Data. It traded as high as $130.50 overnight.
April natural gas
fell 3.7% to $4.833 per million British thermal units.
Stephen Innes, managing partner at SPI Asset Management, said he’s “traded oil for decades, but I’m throwing darts today.”
The market is “pricing out Russian oil supply…while pricing in Iran supply,” he said in a Monday note, but the loss of Russian oil “exceeds the upside” of potential supply from Iran, Innes said in Monday commentary.
““I’ve traded oil for decades, but I’m throwing darts today.””
— Stephen Innes, SPI Asset Management
Speaking on CNN’s “State of the Union,” Blinken said the White House is reviewing the prospect of banning Russian oil imports, in coordination with European allies, while attempting to mitigate the impact of any such ban on global supplies, which could drive already-lofty prices further higher.
Britain is considering a ban on Russian oil, but Germany has rejected the proposal, according to the Financial Times.
“The market was already factoring in supply tightness due to voluntary import curbs by some buyers and logistical issues around the Black Sea; however, any official restrictions on Russian crude could make it further challenging to balance the oil market given that Russia is one of the major crude oil suppliers to Europe and Asia,” said Warren Patterson, head of commodities strategy at ING, in a note.
“U.S. imports of Russian crude oil are relatively small at an average of around 198,000 [barrels a day] in 2021 (contributing only around 3% of total U.S. imports) and restrictions on only U.S. imports may not be detrimental to global crude oil supplies in the immediate term, although this could continue to support sentiment,” he wrote.
That said, there has already been something of a de facto embargo on some Russian crude, which has struggled to find buyers.
The “scramble for additional barrels” to fill what could balloon to a 3- to 4-million barrel a day Russian export deficit will “undoubtedly move into warp speed this week with the White House signaling a willingness to embargo Russian oil and key energy market participants continuing to head for the exit, lest they stand accused of war profiteering,” analysts at RBC Capital Markets, led by Helima Croft, head of global commodity strategy, wrote in a Monday report.
Meanwhile, Bloomberg reported on Sunday that Saudi Arabia raised prices for all regions, hiking its Arab Light crude for next month’s shipments to Asia to $4.95 a barrel above the benchmark it uses.
Doubts about achieving a nuclear disarmament agreement between Iran and world powers also was helping to push prices of crude higher, Reuters reported. A nuclear accord could see Tehran pour fresh supply onto the market.