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- Oil is rising again as the US and Europe prepared to impose more sanctions on Russia
- Oil rallied to the highest level since 2008 in the first quarter as Russia’s invasion of Ukraine disrupted supplies in an already tight market
- With the war in its second month, Russia is facing allegations that its troops massacred civilians in Bucha and other towns,
Oil rose as the U.S. and Europe prepared to impose more sanctions on Russia following alleged atrocities against Ukrainian civilians.
West Texas Intermediate climbed toward $105 a barrel after closing 4% higher on Monday, the biggest gain in two weeks. Washington will announce additional measures this week, according to National Security Advisor Jake Sullivan, who said these may contain curbs on energy. European policy makers including French President Emmanuel Macron also flagged scope for further steps.
Oil rallied to the highest level since 2008 in the first quarter as Russia’s invasion disrupted supplies in an already tight market faced with roaring demand and dwindling stockpiles. The US. and UK have already moved to bar Russian oil and there’s gathering momentum for some form of similar action from the European Union, although its dependence on flows is higher.
“Given that Europe cannot disengage from Russia’s energy market at the click of a finger, I believe these fears are overdone,” said Jeffrey Halley, a senior market analyst at Oanda Asia Pacific Pte. Moves in Asia may be exacerbated by reduced liquidity with Hong Kong and China out for holidays, he added.
With the war in Ukraine in its second month, Russia is facing allegations that its troops massacred civilians in Bucha and other towns, a charge that Moscow has denied. Later Tuesday, Ukraine President Volodymyr Zelensky is set to address the United Nations’ Security Council, and may urge fresh sanctions.
The possibility of new curbs is offsetting the impact in the global crude market of a vast release by the U.S. from the nation’s strategic petroleum reserves in a bid to tame prices, ease the burden on consumers, and peg back inflation. Other countries have said that they’ll also make oil drawdowns.
Prices:
- West Texas Intermediate for May delivery advanced 1.3% to $104.62 a barrel on the New York Mercantile Exchange at 11:50 a.m. in Singapore.
- Brent for June settlement climbed 1.2% to $108.84 a barrel on the ICE Futures Europe exchange.
Futures remain in backwardation, a bullish pattern marked by near-term prices above longer-dated ones. Brent’s prompt spread – the gap between its two nearest contracts – jumped to $1.66 a barrel from $1.53 on Monday.
In a further sign of tightness — as well as rising demand for Mideast cargoes as buyers shun Russia — Saudi Arabia has raised prices for all regions. Saudi Aramco increased its Arab Light crude for next month’s shipments to Asia to $9.35 a barrel above the benchmark it uses, a record differential.
Goldman Sachs Group said the market likely had a deficit of 1.5 million barrels a day in recent weeks, with inventories at the lowest in recent history on a demand-adjusted basis. The most compelling short-term opportunities were in distillates such as diesel and jet fuel, it said in an April 3 note.
Many western companies aren’t taking Russian crude, although discounted exports are going to buyers in Asia including China and India. On Monday, commodity trader Trafigura Group offered to sell a cargo of Russia’s Urals grade at a record discount but there were no bids for the shipment.
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