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CNN Business
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International crude oil prices rose to more than 110 dollars a barrel and natural gas cost He jumped to a new record in Europe on Wednesday as Russia’s record Escalation of the military campaign in Ukraine It fueled fear in the markets of supply shock.
Brent crude futures, the global benchmark, jumped nearly 7% to $111 a barrel at 7:10 a.m. ET. US oil futures also rose more than 6% to trade at $109.75 a barrel. In Europe, the wholesale price of natural gas rose by 60% to a record 194 euros ($215) per megawatt-hour. That’s more than double what it was last Friday.
“The market panic is here,” said Louise Dixon, senior oil market analyst at Rystad Energy. “The price’s initial upward reaction after the conflict in Ukraine began six days ago is only getting worse.”
Russia’s energy wealth has not been directly targeted by Western sanctions imposed in the wake of the invasion of Ukraine. But it is a huge card that the United States and Europe may play if Russia continues its offensive.
“We’re thinking about it, it’s a lot on the table, but we need to weigh all the impacts,” White House Press Secretary Jen Psaki said during an MSNBC appearance. We are not trying to harm ourselves, we are trying to harm President Putin and the Russian economy. ”
“Almost every day there are new sanctions and new steps that we take and announce with our Western partners or countries in Europe. We are doing it at a steady pace, in a united way, which is very important for the president,” Psaki added.
Moscow is already finding it difficult to sell shipments of Russian crude oil to traders and refiners worried about falling into the fallout from sanctions targeting the financial system. Tanker operators warn of the dangers to ships in the Black Sea, as the major international oil companies feel Synthesis operations in the country.
Russia’s main grade Urals oil traded at a discount of $18 a barrel to Brent crude on Wednesday as buyers avoided Russian exports, according to analysts at Commerzbank. Analysts said the cuts had not been this large since the collapse of the Soviet Union.
“The differences in oil prices reflect a clear unwillingness to take Russian crude, and there is still [a] “The risk of further sanctions that could indirectly or directly affect oil purchases or supplies,” said Shane Kim, head of oil supply and production analysis at Standard & Poor’s Global Commodity Insights.
The massive price increases come despite efforts by the West to calm markets, and risk fueling already high global inflation. On Tuesday, the United States and 30 other members of the International Energy Agency allowed the release of 60 million barrels of emergency oil reserves, which will cover nearly two weeks of Russian oil shipments.
“The bottom line is that this is not enough to calm the market. It represents a kind of helpful solution,” said Michael Tran, managing director of global energy strategy at RBC Capital Markets.
Huge price increases will increase the cost of fuel around the world, resulting in higher travel and transportation costs. It would also increase inflation and could act as a drag on economic growth, complicating global central banks’ decisions as they try to counter higher prices.
Investors fear that Russia’s energy exports will be limited or halted, either as a result of the conflict in Ukraine – a major pipeline route – or additional Western sanctions that could target the Russian economy.
“Russian oil is seeing fading buying interest,” Commerzbank analysts said. They added, “The market appears to be pricing in the interruption of Russian oil shipments.”
Russian natural gas continues to flow into Europe, according to Alex Frulli, market analyst at Independent Commodity Intelligence Services. But he said there was “a lot of uncertainty and anxiety about how things might change”.
Froley noted that the UK has banned Russian owned and controlled ships from its ports, which could disrupt LNG shipments from Russia which account for between 3% and 4% of the country’s gas supply.
“Traders may be concerned about whether continental Europe will impose a similar ban on Russian ships,” he said.
It is not clear if Russian oil exports can be replaced if they are disrupted. The Organization of the Petroleum Exporting Countries (OPEC) is scheduled to meet today with allied producers, including Russia, as the group is under heavy pressure from the West to significantly increase production.
But Saudi Arabia government On Tuesday, it said it believed that OPEC+ should stick to its plan to gradually increase production by just 400,000 barrels per month – a fraction of Russia’s 10 million barrels per day of crude production.
Many of the world’s largest oil companies are abandoning Russia or halting new investments in exploration and development projects.
ExxonMobil said on Tuesday it was abandoning its latest project in the country, Sakhalin-1 – which has been described as “one of the largest international direct investments in Russia”. An Exxon subsidiary was the operator of the project, and the company’s decision to withdraw from its more than 25-year presence in Russia would end.
BP, Shell and Norway’s Equinor all said this week that they intend to exit their Russian businesses in a potential multibillion-dollar blow to their balance sheets. France’s TotalEnergies has halted new investments.
Mark Thompson and Julia Horowitz contributed to the report.
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