Oil prices soared and ended the week at their highest level for several years as Russia's invasion of Ukraine escalated. In addition, oil buyers are also avoiding buying from the world's second largest crude exporter.
Friday (4/3), the price of Brent crude oil futures for May 2022 delivery closed up 6.9% to US$ 118.11 per barrel. In a row, the price of West Texas Intermediate (WTI) crude oil futures for delivery in April 2022 closed up 7.4% to US$ 115.68 per barrel.
That was the highest close for Brent since February 2013 and for WTI since September 2008. During the week, Brent rose to its highest intraday since May 2012 and WTI's highest since September 2008.
Crude oil prices posted their biggest weekly gains since mid-2020, with benchmark Brent rising 21% and WTI surging 26%. The most frequently traded oil futures closed at levels not seen since 2013 for Brent and 2008 for WTI.
Oil prices surged throughout the week as the United States (US) and its allies imposed sanctions on Russia. While the sanctions are not aimed at Russia's oil and gas sales, they still put pressure on its industry, and threaten to develop a supply crisis in the coming months.
Currently, Russia exports 4 million to 5 million barrels of oil every day, making it the second largest exporter of crude oil in the world after Saudi Arabia. Traders were barely able to sell Russian oil all week, with Shell PLC SHELL on Friday the only significant buyer of Russian cargo, which was sold at a sharp $28 discount on physical Brent crude.
The commotion is likely to continue. The Biden administration, under pressure from lawmakers from both major parties, said it was considering options to cut Russian oil imports from the US even as it tries to minimize the impact on global supply and consumers.
"While US oil imports from Russia are small in a global context," UBS analyst Giovanni Staunovo said crude prices rallied late in the day as "some market participants may be concerned that other countries may follow suit."
Britain will seek to target Russia's energy sector in future rounds of sanctions, its foreign minister said on Friday. The government has resisted the move so far, due to concerns that it would push up bills on the energy sector.
Most Americans support the idea of banning Russian oil imports, with 80% saying the United States should stop buying Russian oil, according to a Reuters/Ipsos poll completed on Friday.
Canada also banned imports of Russian oil earlier this week. Russia's biggest buyers include China, South Korea, Germany and the Netherlands. Some refiners have stopped buying Russian oil, and trading companies are reluctant to transact with Russian sellers for fear of further sanctions.
Indirect talks between Iran and the US about reviving the 2015 Iran nuclear deal are close to a deal, Britain's chief envoy said Friday as he and his French and German counterparts flew home to meet ministers.
Analysts said such an agreement could add 1 million barrels of daily supply to the market, but that it would not be enough to offset falling supplies from Russia.
More oil supplies will be added from the coordinated release of more than 60 million barrels of oil reserves by developed countries, agreed this week. Japan said Friday it plans to release 7.5 million barrels of oil.
