Oil soars as talks of embargo fuel fears

With Brent oil already approaching a record high, prices could hit $185 a barrel by the end of the year if supply disruptions continue, analysts say.

Oil soared in Asia yesterday – rising as much as 18% at the start of the session – after reports that the US was discussing a ban on Russian crude imports sent shockwaves through a market already in shock.

Brent oil climbed to nearly US$140 a barrel, the highest since 2008 and approaching an all-time high.

US President Joe Biden’s administration is considering banning Russian oil imports into the United States without the involvement of allies in Europe, at least initially, two people familiar with the matter have said.

Photo: AFP

Britain is considering a ban on oil imports from Russia, Minister of State for Europe and North America James Cleverly has said.

“We import very, very little Russian hydrocarbons anyway,” Cleverly told Times Radio. “So that’s something that we will of course consider.”

It came after US Secretary of State Antony Blinken told NBC over the weekend that the White House was in “very active discussions” with its European allies over a ban on tightening economic pressure on Russian President Vladimir Putin.

Japan, which counts Russia as its fifth-largest crude oil supplier, is in talks with the United States and European countries over the possibility of banning imports of Russian oil, Kyodo News reported yesterday.

JPMorgan Chase & Co said the global benchmark could end the year at $185 a barrel if Russian supplies continue to be disrupted, while a hedge fund said $200 was a possibility.

The shock of soaring oil and other commodity prices rippled through markets and sounded the alarm to central banks. The rupiah has been one of the biggest currency losers in Asia on fears the Reserve Bank of India will raise its inflation forecast, but has little room to tighten monetary policy.

The swings in Brent eclipsed those of the 2008 global financial crisis and the drop in demand triggered by the COVID-19 pandemic. Traders, shippers, insurers and banks are increasingly reluctant to accept or finance purchases of Russian barrels as they navigate financial sanctions.

Efforts are underway to try to increase the supply. Two senior US officials met with members of Venezuelan President Nicolas Maduro’s government in Caracas to discuss global oil supplies and the country’s ties with Russia, sources familiar with the matter said.

Iran has made progress toward an agreement with world powers over its nuclear program, which could pave the way for the lifting of sanctions on Tehran’s oil by the third quarter.

In more worrying news for supply, OPEC producer Libya said its oil output fell below 1 million barrels a day due to a domestic political crisis.

Saudi Arabia has raised prices for its main crude blends for all regions following the surge in oil futures, raising costs for refiners who could be forced to cut processing rates if profit margins were shrinking. The kingdom has raised its light Arabian crude for next month’s shipments to Asia to US$4.95 a barrel above the benchmark it uses. This is the broadest data going back to 2000.

Over the weekend, the IMF warned that the war, along with subsequent sanctions on Russia, would have a “serious impact” on the global economy.

“While the situation remains very fluid and the outlook is subject to extraordinary uncertainty, the economic consequences are already very severe,” the Washington-based lender said.

Additional Reuters reports

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