Title: Oil spikes as Russian supply concerns increase amid sanctions

Mar 02, 2022 03:15AM ET

By: AnalysisWatch

Oil prices jumped on Wednesday as fears grew of supply disruptions due to drastic sanctions imposed on Russian banks as the conflict in Ukraine escalated, while traders looked for alternative sources of oil in an already tight market.

Brent crude futures contracts climbed as much as $8 to $113.02 a barrel, the highest since June 2014, before falling to $111.75 at 3:04 p.m.

West Texas Intermediate crude futures in the United States rose $7.24, or 7%, to $110.67 per barrel, having previously reached their highest level since August 2013.

According to data going back to 2004, backwardation in the Brent crude futures contract, which occurs when spot prices exceed subsequent supply, climbed to its highest level on record. The premium between the first-month Brent futures contract and the six-month contract has climbed to USD 18.55 per barrel.

Russian oil supplies account for around 8% of the world's supply.

Exxon Mobil announced on Tuesday that it would withdraw from the Russian oil and gas business as a result of Moscow's invasion of Ukraine. The decision means that the company will withdraw from the management of large-scale production facilities on Sakhalin Island in Russia's the Far East.

At the same time, although Western powers have not imposed direct sanctions on energy exports, U.S. traders in New York and Gulf hubs are avoiding Russian oil.

In a State of the Union address prompted by Russia's intervention in Ukraine, US President Joe Biden warned Vladimir Putin that the Russian leader "has no idea what's coming."

Saudi Arabia, the world's biggest oil exporter, could drastically raise Asian crude prices in April, trade sources said, with price differentials reaching all-time highs for most grades as global supplies tighten due to financing and supply problems caused by sanctions against Russia.