Brent Crude Soars to $139 a Barrel as U.S., Europe Mull Russian Oil Import Ban

Bozorgmehr Sharafedin and Scott DiSavino
Monday, March 7, 2022

 Oil prices spiked to their highest levels since 2008 on Monday as the United States and European allies weighed a Russian oil import ban and delays in the potential return of Iranian crude to global markets fuelled supply fears.

In the first few minutes of trade Brent crude reached $139.13 and U.S. West Texas Intermediate (WTI) hit $130.50, both benchmarks striking their highest levels since July 2008.

By 1017 GMT, prices had lost some of those gains, with Brent up $6.60, or 5.6%, at $124.71 per barrel, and WTI up $6.67, or 5.8%, at $122.35.

The United States and European allies are exploring banning imports of Russian oil, U.S. Secretary of State Antony Blinken said on Sunday, and the White House coordinated with key Congressional committees moving forward with their own ban.

Analysts at Bank of America said if most of Russia's oil exports are cut off, there could be a 5 million barrel per day (bpd) or larger shortfall, and that means oil prices could go as high as $200.

JP Morgan analysts said oil could soar to $185 this year, and analysts at Mitsubishi UFJ Financial Group Inc (MUFG) said oil may rise to $180 and cause a global recession.

"If the supply tightness does not ebb, oil may exceed way above its record high," Howie Lee, an economist at Singapore's OCBC bank, said.

"In the worst-case scenario of a complete sanction on Russia’s energy exports, I won’t be surprised to see Brent trading above $200," he added.

Russia is the world's top exporter of crude and oil products combined, with exports at around 7 million bpd, or 7% of global supply. Some volumes of Kazakhstan's oil exports from Russian ports have also faced complications.

The head of Japan's largest business lobby said the country's imports of Russian crude could not be replaced immediately. Russia is Japan's fifth-biggest supplier of crude oil and liquefied natural gas (LNG).

Global oil prices have spiked more than 60% since the start of 2022, along with other commodities, raising concerns about world economic growth and stagflation.

China, the world's No. 2 economy, is already targeting slower growth of 5.5% this year.  

Meanwhile, talks to revive Iran's 2015 nuclear deal with world powers were mired in uncertainty on Sunday following Russia's demands for a U.S. guarantee that the sanctions it faces over the Ukraine conflict will not hurt its trade with Tehran. China has also raised new demands, according to sources.  

In response to Russia's demands, Blinken said on Sunday that the sanctions imposed on Russia over its Ukraine invasion have nothing to do with a potential nuclear deal with Iran.

"Iran was the only real bearish factor hanging over the market but if now the Iranian deal gets delayed, we could get to tank bottoms a lot quicker especially if Russian barrels remain off the market for long," said Amrita Sen, co-founder of Energy Aspects, a think tank.

Iran's top security official said on Monday the outlook for nuclear talks "remains unclear". Iran's foreign ministry spokesman said a deal can be reached quickly if Washington accepts points made by Tehran.

Iran will take several months to restore oil flows even if it reaches a nuclear deal, analysts said.

Separately, U.S. and Venezuelan officials discussed the possibility of easing oil sanctions on Venezuela but made scant progress toward a deal in their first high-level bilateral talks in years, five sources familiar with the matter said, as Washington seeks to separate Russia from one of its key allies.

(Reporting by Bozorgmehr Sharafedin in London and Scott DiSavino in New York, additional reporting by Florence Tan in Singapore; editing by Michael Perry and Jason Neely)

Categories: Energy Activity Production Regulations Oil Price Sanctions

Related Stories

Yinson Production, “K” LINE Target Europe's CCS with FSIU and LCO2 Solutions

Woodside Agrees Long-Term LNG Supply with Petronas Unit

MODEC and Terra Drone Renew FPSO Drone Inspection Partnership

Petronas-Eni Upstream Joint Venture to Take Up to Two Years to Set Up

Chuditch Gas Field Drilling Ops Get Delayed to Next Year

French Oil Major Acquires Interests in Multiple Blocks in Southeast Asia

Indonesia's Medco Starts Production at Natuna Sea Fields

CNOOC Puts Into Production New Oil Field in South China Sea

Woodside to Shed Some Trinidad and Tobago Assets for $206M

CNOOC Sees 11% Profit Growth in 2024 Driven by Record Oil Production

Current News

Petrovietnam, Partners Sign PSC for Block Off Vietnam

Japan Protests China’s New Oil and Gas Construction Activities in East China Sea

CNOOC Signs Hydrocarbons Exploration and Production Deal with Kazakhstan

Thailand's PTT to Buy LNG from Glenfarne's Alaska LNG Project

Woodside and Jera Agree LNG Cargoes Supply for Japan’s Winter Period

Petronas Expands Suriname Portfolio with Deepwater Block Acquisition

Japanese Oil and Gas Firm Enters Two Blocks off Malaysia

Yinson Production, “K” LINE Target Europe's CCS with FSIU and LCO2 Solutions

Woodside Agrees Long-Term LNG Supply with Petronas Unit

MODEC and Terra Drone Renew FPSO Drone Inspection Partnership

Subscribe for AOG Digital E‑News

AOG Digital E-News is the subsea industry's largest circulation and most authoritative ENews Service, delivered to your Email three times per week

https://accounts.newwavemedia.com