Stock Groups

Oil jumps as traders fear disruption in Russia’s energy industry


A “nodding donkey” oil pumping machine, commonly known as an oil pumping jack in an oilfield in Russia’s Republic of Bashkortostan on Thursday, November 19, 2020.

Andrey Rudakov | Bloomberg | Getty Images

After sanctions imposed by the U.S. on certain Russian banks and Western allies, oil prices rose Sunday night. This raised concerns that Russia’s energy supply will be affected indirectly.

Brent crudeThe international benchmark for oil prices, grew by up to 7% and traded as high as $105 per barrel. West Texas Intermediate crude futuresAdditionally, a benchmark U.S. oil price, ICE, has gained as high as 7% in order to trade at least $98 per barrel.

The prices fell slightly later. Brent traded at $103.06 per barrel while WTI was up 6.2% to $97.47 per barrel. Brent rose 5.24%.

Both agreements broke above $100 on ThursdayAfter Russia’s invasion of Ukraine in 2014, the market was up for the first-ever time. However, Brent and WTI were unable to sustain a spike during the Thursday session. They also retreated into Friday’s trading following the White House’s initial round of sanctions that did not focus on Russia’s oil system.

The U.S. and its European allies, Canada, declared that they will cooperate with the Canadian government on Saturday disconnect specific Russian banksThe Society for Worldwide Interbank Financial Telecommunication (SWIFT)

The global powers made the statement in joint response to the threat.

Russia is especially important as a supplier of oil and natural gas to Europe. Although the sanctions aren’t directly directed at energy, experts predict that there will be ripple effects.

John Kilduff from Again Capital stated that Russian petroleum sales will be difficult because of the numerous banking sanctions. Because of the sanctions risk, many banks are unable to provide basic financing.

Russian President Vladimir Putin may also choose to respond against U.S. actions and those of its allies by using energy weapons and shutting off water taps.

“[W]I believe that some Western businesses may not want to continue doing business with Russia because of the uncertain enforcement of the future and coercive measures,” RBC wrote Sunday to clients.

OPEC, Russia and all its oil-producing countries are due to meet next week in order to discuss the Group’s April production strategy. Since the outbreak of the pandemic, the oil alliance has seen an increase in output of 400,000 barrels per month.

As demand increased, the group and other global producers, including the U.S. kept oil supplies under control. The catalyst for pushing crude oil above $100 was Russia’s invasion.

The price hikes at the pumps are affecting consumers. On Sunday, the national average price per gallon for gas was $3.60. data from AAA. According to the White House, it is working hard to ease Americans’ burden.

“Although the sanctions are still being crafted to avoid energy price shocks, we believe this aggressive-but-not-maximalist stance may not be sustainable, with disruptions to oil and gas shipments looking increasingly inevitable,” Evercore ISI wrote in a note to clients.

Russia is casting an unsettling, long-lasting, complicated, unpredictable shadow. According to the firm, the biggest negative for the US economy from all of this is an increase in oil prices.”