While EU nations are considering joining the US in embargoing Russian oil in line with their sanctions for the invasion of Ukraine and following the Houthi’s attacks on Saudi Arabia’s energy facilities, prices of oil jumped on Monday.
The gauge that tracks US crude, West Texas Intermediate, was trading 3.99% higher at $108.88 a barrel while the price of the global benchmark for two-thirds of the world’s oil, Brent crude, went up 4.33% to trade at $112.60 a barrel.
Jeffrey Halley, senior market analyst of Asia Pacific at Oanda, said that the primary reasons for the rise in prices the Houthi attacks in Saudi Arabia, the world’s largest oil exporter, OPEC’s warnings of a structural shortfall in production, and the possible EU embargo on Russian oil for its invasion of Ukraine.
Although he called Monday’s price rise a panicked and aggressive reaction to the Russian invasion of Ukraine, Halley believes that Brent and WTI should settle into a $100-to-$120 range, stressing at the same time that thanks to Russian sanctions, the world will face a structural energy deficit even if the war in Ukraine ends tomorrow.
Meanwhile, Saudi Arabia’s Energy Ministry underscored that the Kingdom will not be responsible for crude supply shortages following Houthi’s attacks on its energy infrastructure, including an Aramco’s LNG plant in Yanbu, the oil storage plant in Jeddah, an Aramco oil installation in Jizan, as well as on the Yanbu Aramco Sinopec Refining Company’s facilities.
Although the Saudi-led military coalition reported no casualties on Sunday, the attacks have caused a temporary drop in the Yanbu refinery’s oil output which is normally 400,000 BPD.
Following the US announcement earlier this month that it would intensify its sanctions on Russia, the world’s second-largest energy exporter, banning crude, gas, and coal imports from the country, EU governments are now mulling the possibility of following Washington’s steps despite the fact that Europe buys about 40% of its gas from Russia
European decision on imposing an oil embargo on Russia will obviously wait till after their meeting with US President Joe Biden this week to discuss a joint response to Russia’s offensive in Ukraine.
At the beginning of March, Russian Deputy Prime Minister Alexander Novak has warned that a rejection of Russian oil would lead to catastrophic consequences for the global market, pushing the price of oil up to $300 per barrel if not more.
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