(LONDON) Oil prices rose above $120 a barrel on Wednesday ahead of several key international highs that point to new Western sanctions against Russia over its invasion of Ukraine.
Posted at 9:55 a.m.
Updated at 10:50 a.m.
Around 10:15 a.m., the close contract of Brent from the North Sea, the benchmark for black gold in Europe, for delivery in May took 4.43% to 120.59 dollars a barrel.
A barrel of WTI listed in New York gained 4.44% to 114.12 dollars.
The price of black gold had unscrewed in recent days from its peak reached at the start of the war in Ukraine, even briefly moving below 100 dollars a week ago.
A month after the start of the Ukrainian conflict, “Russian oil continues to flow. Production and export levels remain strong” but “this could soon change” says Stephen Brennock, analyst at PVM Energy.
The European Union is considering an embargo on Russian oil. “Foreign ministers discussed a possible Russian oil ban this week, although they are divided.”
At the same time, Russia “warned of a sharp drop in oil exports via the Caspian Pipeline Consortium after the infrastructure was damaged by a storm”, explains Walid Koudmani, analyst at XTB.
This pipeline transports oil from the Caspian Sea to the Russian port of Novorossiysk. Its damage jeopardizes a daily supply of around one million barrels of oil per day. This is enough to boost the prices of black gold in an already tight market.
Alexander Novak, Russian Deputy Prime Minister for Energy, meanwhile said on Wednesday that it was “absolutely obvious that without Russian hydrocarbons, if sanctions are imposed, the gas and oil markets will collapse”. .
Moscow also accused the United States on Wednesday of obstructing “difficult” Russian-Ukrainian negotiations, saying Washington’s goal was to “dominate” the world order, including through sanctions.
A “political turning point”?
A NATO summit was convened on Thursday, the day on which a G7 summit and the summit of the European Union are also held in Brussels.
US President Joe Biden, who will attend these three meetings, has already announced that Westerners will adopt “new sanctions against Russia and strengthen” those already in place.
“A total ban on oil almost a month after the invasion of Ukraine would be a political turning point for Europe, which has so far avoided any energy sanctions,” said Louise Dickson, analyst for Rystad Energy.
If the EU gave up oil from Russian ports and pipelines entirely, it would lead to a shortage of more than two million barrels of crude per day in the market, according to estimates by Rystad Energy.
“Russia has threatened to cut gas supplies to Europe in the event of an EU oil embargo, which has added to short-term market volatility,” adds Louise Dickson.
Russian imports provide Europe with 40% of its natural gas needs and 30% for oil.
European natural gas prices started to rise again on Wednesday. The benchmark for the European natural gas market, the Dutch TTF, was on Monday at 116.34 euros per MWh, up more than 17%.
However, it remains very far from its historical peak, reached on March 7, at 345.00 euros per MWh.
“We believe official sanctions against Russia are getting closer and politicians in different countries are starting to consider energy rationing plans,” said Bjarne Schieldrop, an analyst at Seb.
Germany – Russia’s major gas customer – has, for example, undertaken to “accelerate” the construction of two liquefied natural gas (LNG) terminals as part of a long-term energy agreement with Qatar.