- EU members push for a ban on Russian energy imports
- Supply concerns amid Houthi-led strike on Saudi oil facilities
- China coronavirus cases fall, eases demand destruction concerns
A recent news article published in the Platts states that crude rallies 7% as market eyes potential EU sanctions on Russian energy.
Crude futures settled sharply higher
Crude futures settled sharply higher March 21 as the possibility of EU sanctions on Russian oil raised supply concerns.
NYMEX April WTI settled up $7.42 at $112.12/b and ICE May Brent climbed $7.69 at $115.62/b.
The foreign ministers of Lithuania and Ireland said March 21 that it was time for the EU to start looking at sanctions on Russian oil, according to a Reuters report. Current EU sanctions packages have refrained from targeting the energy sector.
“Looking at the extent of the destruction in Ukraine right now, it’s very hard to make the case that we shouldn’t be moving in on the energy sector, particularly oil and coal,” said Irish Foreign Minister Simon Coveney, according to a report from the news agency.
“[The market] is starting to see this growing belief that eventually the EU is going to be put in a position where they will have to ban Russian energy supplies,” OANDA senior market analyst Ed Moya said, adding, “this drastic measure will really hurt the Russian economy, and you will see this market subject to some potentially severe disruptions in the near future.”
NYMEX April RBOB settled 13.28 cents higher at $3.3716/gal and April ULSD finished up 20.28 cents at $3.8009/gal.
Russia finding ways to bypass sanctions
Russia is finding ways to bypass sanctions on its oil supplies and customers are “happy to buy” its discounted crude, the country’s top energy official said March 21.
“Now there are new challenges linked to supply chain disruptions, the insurance of ships that transport our products, and with issues of financing and payment … these issues are being resolved at the moment,” deputy prime minister Alexander Novak said, the Prime news agency reported.
Plans to end imports of Russian oil
The US, the UK, and Canada have announced plans to end imports of Russian oil by the end of 2022.
The discount for a Suezmax cargo of Urals against Dated Brent hit a record-high $33.36 on a FOB Novorossiisk basis March 15, S&P Global Commodity Insights’ Platts assessment showed.
A drone attack perpetrated by Yemeni Iran-aligned Houthi rebels on the Yasref oil facilities in Saudi Arabia over the weekend added to supply risks.
According to media reports, the attack had resulted in a temporary decrease in output at the refinery, but there were no casualties.
“The assault on Yasref facilities has led to a temporary reduction in the refinery’s production, which will be compensated for from the inventory,” the company said. Yanbu Aramco Sinopec Refining Company is a joint venture between Saudi Aramco and China Petrochemical Corporation.
Falling coronavirus cases in China
Falling coronavirus cases in China have eased investor fears of infections spiraling out of control in the world’s second-largest economy.
The country’s National Health Commission reported 1,656 locally transmitted cases March 19, down from 2,157 the previous day.
“Falling new cases underscored the country’s prompt and stringent measures, including lockdowns and mass tests, in containing the rapid spread of the virus. This may help boost investor confidence amid the country’s most severe viral outbreak since 2020,” said IG DailyFX strategist Margaret Yang in a March 21 note.
Chinese authorities had imposed restrictions across nearly 20 provinces and municipalities in recent weeks in a bid to contain the outbreak.
The areas of Guangdong, Shandong, Jilin, and Shanghai, which were among the epicenters of the coronavirus outbreak this time, accounted for around 30% of China’s oil consumption in 2021, S&P Global Commodity Insights data showed.
The lockdowns had prompted concerns of demand destruction that weighed on crude prices during the week ended March 18.
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Source: Platts
