Economy

Oil prices gain after US move to ban Russian oil

Following US announcement of plan to ban Russian oil, prices jump nearly 5% despite prospect of limited impact on US supplies

Sibel Morrow   | 09.03.2022
Oil prices gain after US move to ban Russian oil

ANKARA

Oil prices extended gains on Wednesday after the US announcement of an embargo on Russian energy imports, and the UK’s plan to phase out Russian gas supplies.

International benchmark Brent crude was trading at $131.12 per barrel at 0611 GMT for a 2.4% gain after closing the previous session at $127.98 a barrel.

American benchmark West Texas Intermediate (WTI) traded at $126.31 per barrel at the same time for a 2.1% increase after the previous session closed at $123.70 a barrel.

Crude oil prices rose after the US announced a ban on Russian energy imports in retaliation against Russia’s invasion of Ukraine, prompting a nearly 5% jump in crude prices.

“In a major escalation of efforts to hobble Russia’s economy following its invasion of Ukraine, all US imports of fossil fuels, including oil, will cease following a 45-day period to wind down deliveries of existing orders. The move was matched by the UK, although it will continue to allow natural gas imports from Russia,” Daniel Hynes said.

Of the 4.8 million barrels of daily crude supplies from Russia, the US imported only 200,000 barrels per day of Russian crude last year, while the UK imported less than half that amount.

“Although the impact on US supply may be limited, prices are soaring because the ban makes it more of a challenge to trade in Russian oil and more likely that other countries may follow suit,” said Rystad Energy’s head of Oil Markets, Bjornar Tonhaugen.

Tonhaugen said the market reacted as if a Western embargo was in place, at least partly, resulting in a similar cutback in supplies as an outright embargo would.

He also warned that “the 4.3 million barrels per day of Western crude imports from Russia in January 2022 cannot be replaced by other sources of oil supply in a short period of time.”

The US is also one of the major contributors to a coordinated effort of the 31 members of the International Energy Agency (IEA) to release oil from its Strategic Petroleum Reserves (SPR). The US pledged to release 30 million barrels to ease rising prices and provide supply support for the market under Russian threat due to the war.

Although Germany earlier ruled out banning energy imports from Russia, the European Commission proposed a plan called “REPowerEU” to stop Europe’s dependence on Russian fossil fuels before 2030, starting with gas, after the bloc’s energy sources came under threat with Russia's invasion of Ukraine.

Shell, in the meantime, apologized for buying a cargo of Russian crude oil to be refined into products, like petrol and diesel, and vowed to withdraw from its involvement in all Russian hydrocarbons, including crude oil, petroleum products, gas and liquefied natural gas (LNG) in a phased manner, aligned with new government guidance.

As an immediate first step, the company will stop all spot purchases of Russian crude oil, it said, adding that it will also shut its service stations, aviation fuels and lubricants operations in Russia.

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