Oil prices have climbed to their highest point since 2008, as US officials are hard at work discussing a possible on ban imports of Russian oil and natural gas with Europe. Within the first minutes of Monday’s trade session, Brent crude soared to $139.13 per barrel and West Taxes Intermediate (WTI) recorded $130.50 per barrel.
Additionally, the contracts of both crudes skyrocketed to their highest levels since July 2008. Brent contracts recorded $147.5 a barrel and WTI jumped to $147.27 for a barrel.
With a war in Ukraine brewing, US Secretary of State Antony Blinken has taken the lead in discussing a possible ban on Russian oil and natural gas with America’s European allies. The move is part of an effort to intensify economic sanctions against Russia and recent developments have shown that Japan could also be part of this initiative.
“A boycott would put enormous pressure on oil and gas supply that has already felt the impact of increasing demand,” CMC Markets analysts said.
Meanwhile, prices increased due to delays in making a final decision regarding the nuclear deal signed in 2015, which had an impact on the potential return of the Iranian crude to the markets which is currently suffering from the oil supply’s disturbance. The delay was due to Russian demands from the US to guarantee that the sanctions imposed against it would not reflect negatively on its trade relations with Tehran.
“The sanctions that have been put in place … on Russia have nothing to do with the Iran nuclear deal and the prospects of getting back into that agreement,” Blinken clarified. “These things are totally different and just are not, in any way, linked together. So, I think that’s irrelevant.”
Moreover, the upward momentum of oil prices has been accompanied by Libya’s oil production declining to 920,000 barrels per day (bbl/d) due to the ongoing political crisis in the country. This is besides the decision of the Organization of the Petroleum Exporting Countries (OPEC) to stick to its commitment to the OPEC+ agreement with Russia and resisted calls to increase output more quickly than called for under the agreement.
According to Bloomberg, traders expected that oil could jump to $200 before the end of March. JPMorgan Chase & Co stated last week that it predicts that Brent crude could reach $185 per barrel at the end of the year if Russian supplies continue to be disrupted, while Australia & New Zealand Banking Group Ltd. expected that the new sanctions may affect the supply of around 5 million barrels per day (mmbbl/d) of pipeline and seaborne.