Oil prices accelerated on Monday, propelled by new sanctions announced Friday by the United States and the United Kingdom against the Russian energy sector, which suggest a reduction in supply on the global market. The price of a barrel of Brent from the North Sea, for delivery in March, gained 1.57% to 81.01 dollars. Its American equivalent, a barrel of West Texas Intermediate, for delivery in February, climbed 2.94% to $78.82.
The US Treasury Department announced sanctions on Friday against more than 180 ships as well as major Russian oil companies Gazprom Neft and Surgutneftegas, complying with “the G7 commitment to reduce Russian energy revenues”. London also sanctioned these two companies. “We could lose part of the Russian supply on the world market, given the scale of what has been announced”observed John Kilduff of Again Capital. The sanctioned companies together represent “nearly 20% of production (two million barrels per day) and exports (around 900,000 barrels per day) of Russian oil, and controls more than 1.5 billion euros” figure out DNB Markets analysts.
“Sourcing before sanctions”
This anticipated scarcity in the availability of black gold has pushed prices up, and a barrel of Brent has been trading above $80 since Friday. “The market knows how much the Russians and Iranians managed to circumvent” sanctions in recent years, commented Mr. Kilduff. “This time”the new sanctions “could really come to fruition”added the analyst. “Oil buyers in China and India are scrambling to stock up ahead of sanctions”also argued in a note Phil Flynn, of Price Futures Group.
For its part, the Kremlin considered on Monday that the sanctions announced by the American government against the Russian energy sector would “destabilize” global energy markets. “The medium-term impact of the new measures is not clear”according to Tamas Varga, of PVM, who notes that “any tangible shortage could be covered” by the reserve capacity of the Organization of the Petroleum Exporting Countries and its allies (OPEC+). In total, OPEC+ keeps untapped capacity of nearly 6 million barrels of oil per day, which contributes to its strategy of reducing supply to maintain higher prices on the markets.
