Oil soared, briefly touching $139 a barrel, in a dramatic start to another stormy week after
the White House said it was discussing an embargo on Russian supplies, stoking supply
fears in an already jittery market.
Brent crude soared as much as 18% in a matter of minutes, before paring its gains
to 9% on Monday. Last week, the Russian invasion of Ukraine caused a 21%
increase, raising fears of a brutal supply crisis. US Secretary of State Antony Blinken
said the Biden administration and its allies are discussing a Russian oil embargo, as
pressure mounts to strike back at the Ukraine invasion by compressing the Russia’s key
energy industry exports.
Although traders, shippers, insurers and banks have been increasingly wary of taking on
or financing purchases of Russian barrels, a formal embargo would add to the
uncertainty that has pushed Brent to trade in its widest range since the contract
was launched. futures in 1998. It adds to the more bullish news of the weekend, with
Saudi Arabia raising the prices of its main crude blends and Libya saying that its
production has fallen due to a political crisis in the North African nation, although
advances in nuclear talks with Iran offer the prospect of some long-term relief.
“There are a lot of twists ahead of us,” Mike Muller, head of Vitol Asia, said on Sunday in
a podcast produced by Dubai-based consultancy and publisher Gulf Intelligence. “While I
think the world is already pricing in the fact that there will be an inability to receive
a serious amount of Russian oil in the Western Hemisphere, I don’t think we’ve
priced everything in yet.”
Saudi Arabia raised prices for all regions, raising its Arab Light crude for next month’s
shipments to Asia to $4.95 a barrel above the benchmark it uses. This is the largest
premium since Bloomberg began collecting data in 2000.
In Libya, oil production has fallen below 1 million barrels a day, according to the
energy minister, as the OPEC member sinks into political crisis. Production has
fallen to 920,000 barrels a day, Mohammed Oun said in response to a query from
Bloomberg. On Wednesday it stood at about 1.2 million barrels.
Iran has moved toward an agreement with world powers over its nuclear program. If
successful, that could pave the way for sanctions on Tehran’s oil to be lifted in the third
Over the weekend, the International Monetary Fund warned that the war, as well as
subsequent sanctions imposed on Russia, will have a “severe impact” on the world
economy. “Although the situation remains very fluid and the outlook is subject to
extraordinary uncertainty, the economic consequences are already very serious,” the
Washington-based credit agency said.