Global oil may reach $150pbl if West bans Russian Crude — Analysts
By Uthman Salami
Analysts have warned that global oil price could reach $150 if Western countries succeed in banning Crude from Russia.
After attacking Ukraine, Russian government has seen different economic sanction from the West, but the region has been very reluctant to slap sanctions on Russia’s oil and gas exports.
Experts have opined that the reluctance was associated to the Western allies concern about the repercussions on Europe’s energy supply and skyrocketing oil and gasoline prices.
Though the Western allies have not taken off sanction of the sector off the table, Russian oil, international crude prices could jump to $150 per barrel.
Despite Russia crude still enjoying sales in the global market, prices have skyrocketed and going beyond $100 per barrel years of trading below the threshold. Yet, many analysts have said the prices are set to remain very high and jump higher still because buyers and refiners.
“While some remain transfixed with the idea that an Iran agreement will provide much needed relief (from rising oil prices), we again caution that the deal is still not done and the sums entailed would simply be too small to backfill a major Russian disruption,” RBC Capital analyst Helima Croft wrote in a note cited by Reuters on Thursday.
Russia has received grave sanctions from the U.S., the EU, and the UK. The Western allies kicked several Russian banks out of the international SWIFT system, Master Cards, Visa and others have unleashed their own sanctions
Although direct sanctions on Russia’s oil and gas are yet to be implemented, trade in Russian commodities has become toxic for many global players.
“Because of the banking sanctions we’ve estimated about 70% of Russian crude oil exports can’t be touched. That’s about 3.8 million bpd,” Amrita Sen, Director of Research at Energy Aspects said on Wednesday.
Russia’s crude and refined product exports have dropped by one-third, or by 2.5 million bpd, this week, according to estimates from Energy Intelligence based on shipping data and interviews with traders.
Oil market participants have started to realise that a lot of Russian oil could be off the market in the near future — even if the West doesn’t impose direct sanctions on Russian oil — adding to the already tight market balances.
The oil market seems to believe that sanctions on Russian oil are coming, John Kilduff, partner at Again Capital said.
“These are barrels that we cannot make up, so that’s why this market is on tenterhooks,” Kilduff said.
Sanctions on oil from Russia — which exports around 5 million bpd of crude and 2.8 million bpd of refined products — would have a much bigger effect on market balances compared to the sanctions on Iran and Venezuela of the previous years, analysts say.
Refiners have started to replace Russian crude. Some of the biggest U.S. importers of Russian crude oil have started suspending their purchases of the commodity, including Monroe Energy, the third-biggest U.S. buyer of Russian oil.
Neste of Finland said on Tuesday, “Due to the current situation and the uncertainty in the market, Neste has mostly replaced Russian crude oil with other crudes, such as North Sea oil.” Neste is preparing “for various options in procurement, production and logistics.”
On Wednesday, Portugal’s energy group Galp said that it was suspending all new purchases of petroleum products either sourced in Russia or from Russian companies.
“Our decision is simple: Galp will not contribute to finance war,” the company said.
