A recent news article published in the Platts states that crude extends gains as US, EU mull Russian oil ban.
European allies consider a potential ban
Crude oil futures extended gains in mid-afternoon Asian trade March 7 as US and its European allies consider a potential ban on Russian oil imports, while delays in lifting sanctions on Iranian oil sales raised tight supply fears.
At 2:55 pm Singapore time (0655 GMT), the May ICE Brent futures contract was up $11.45/b (9.69%) from the previous close at $129.56/b, while the April NYMEX light sweet crude contract was $10.20/b (8.82%) higher at $125.88/b. At these levels, both benchmarks have spiked around 65% since the start of 2022.
“An embargo of Russian oil is now in discussion between US and its allies. In the event of any implementation, the move will further exacerbate the supply-demand imbalance in an already tight oil market”, IG market strategist, Yeap Jun Rong said in a March 7 note.
US in discussion with European Allies
US Secretary of State Antony Blinken said March 6 that the country is now discussing with its European allies “the prospect of banning the import of Russian oil while making sure that there is still an appropriate supply of oil in world markets”, S&P Global Commodity Insights reported earlier.
The comments override the Biden administration’s earlier stance that it is not interested in banning Russian oil.
Widespread secondary sanctions
Widespread secondary sanctions, like those imposed on Iran, could be aimed at Russia’s 7 million b/d of oil exports, 4.5 million b/d of which is crude, S&P Global reported earlier.
Russian crude exports could fall by 1 million-2 million b/d this month as a result of existing sanctions on Moscow and as the market voluntarily suspends purchases, according to analysis by S&P Global.
If sanctions against Russia’s oil exports are implemented, JP Morgan analysts estimated oil could soar to $185/b this year, while analysts at Bank of America estimated oil prices could double from $100/b to $200/b.
“Why it’s difficult to calculate a top [for crude oil prices] is because Russian oil will find its way to the Chinese market, lessening demand from the Middle East while simultaneously factoring in demand destruction,” Stephen Innes, managing partner at SPI Asset Management said in a March 7 note.
Elsewhere, talks to revive Iran’s 2015 nuclear deal remain uncertain following Russia’s demand for written guarantees from the US that the sanctions it faces over the Ukraine conflict will not hurt its trade with Iran.
“Moscow had to ask the US for guarantees first, requiring a clear answer that the new sanctions will not affect its rights under the nuclear deal,” Russian foreign minister, Sergei Lavrov said March 6.
Separately, International Atomic Energy Agency Director General Rafael Grossi was in Tehran March 5 for meetings with senior Iranian officials to try to resolve disagreements over the agency’s demand for access to four sites where suspicious nuclear activities were alleged to have taken place.
IAE agreement on a 3 month plan
Following the meetings, Iran and IAEA agreed on a three-month plan that will resolve these issues, addressing an obstacle in reviving the nuclear deal, according to an IAEA statement March 5.
Analysts said the prospect of an Iran nuclear deal is failing to offset concerns of supply shortages, as it might take until the end of the year for Iran to ramp up exports by a potential 1 million b/d.
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Source: Platts
