Brent crude futures, the global benchmark, jumped nearly 9% to $ 113.65 a barrel, the highest level since 2014. U.S. oil futures also rose more than 8% to $ 112.25 a barrel. In Europe, the wholesale price of natural gas rose by 60% to a record high of € 194 ($ 215) per megawatt-hour. That’s more than twice as much as last Friday.
“The market panic is here,” said Louise Dixon, senior oil market analyst at Rystad Energy. “The initial reaction to the rise in prices after the conflict in Ukraine, which began six days ago, is only intensifying.”
Russia’s energy wealth has not been directly targeted by Western sanctions imposed after the invasion of Ukraine. But this is a huge card that the United States and Europe can still play if Russia continues to attack.
“She’s still at the table, not out of the table,” White House spokeswoman Jen Psaki told CNN on Wednesday.
But she added that President Joe Biden did not want to “bring down global oil markets or the global market, or influence the American people more with higher energy and gas prices.”
According to analysts at Commerzbank, Russia’s leading oil, Urals, was trading at a $ 18 a barrel discount on Brent oil on Wednesday as buyers avoided Russian exports. The concession was not so great after the collapse of the Soviet Union, analysts say.
“Differences in oil prices reflect a clear reluctance to take Russian oil and continue to exist [a] the risk of more sanctions that could indirectly or directly affect oil purchases or supplies, ”said Shin Kim of S&P Global Commodity Insights, head of analysis of oil supply and production.
The massive rise in prices comes despite Western efforts to calm markets and risks further fueling already rising global inflation. On Tuesday, the United States and 30 other members of the International Energy Agency approved the release of 60 million barrels of emergency oil stocks, which will cover approximately two weeks of Russian oil supplies.
“The bottom line is that this is not enough to cool the market. It’s a small band-aid solution,” said Michael Tran, managing director of global energy strategy at RBC Capital Markets.
Huge price increases will make fuel more expensive around the world, increasing the cost of travel and commuting. They will also contribute to inflation and could stifle economic growth, complicating global central bank decisions while trying to counter rising prices.
Investors fear that Russia’s energy exports will be limited or halted as a result of the conflict in Ukraine – a key pipeline route, additional Western sanctions that could target the heart of the Russian economy, or Moscow’s retaliation.
“For Russian oil, there is an evaporation of interest rates on purchases,” said analysts at Commerzbank. “The market seems to be increasingly priced when Russian oil supplies are cut off,” they added.
According to Alex Froley, a market analyst at the Independent Commodity Intelligence Services, Russian natural gas continues to flow to Europe. But there is “a lot of uncertainty and concern about how things can change,” he said.
Froley noted that the United Kingdom has banned Russian-owned and controlled ships from its ports, which could disrupt Russian liquefied natural gas supplies, which account for between 3% and 4% of the country’s gas supplies.
“Traders may be worried about whether continental Europe is introducing a similar ban on Russian ships,” he said.
OPEC on the sidelines
The Organization of the Petroleum Exporting Countries and allied producers, including Russia, agreed on Wednesday to stick to their plan to gradually add oil to the market, opposing pressure from developed economies to do more to ease prices.
The Saudi-led group, called OPEC +, said in a statement that it would increase production by 400,000 barrels a day in April, a small fraction of Russia’s 10 million barrels a day of crude oil.
“The current fundamentals of the oil market and the consensus on its prospects point to a well-balanced market and that the current instability is not caused by changes in the market fundamentals, but by current geopolitical developments,” said OPEC +.
Nuclear talks between Iran and the United States could place more Iranian barrels on the market, but that will not ease the situation in the near future.
Get out of Russia
Many of the world’s largest oil companies are leaving Russia or halting new investments in exploration and development projects.
ExxonMobil said on Tuesday that it was abandoning its latest project in the country, Sakhalin-1, which has been declared “one of the largest single international direct investments in Russia”. A subsidiary of Exxon was the operator of the project and the company’s decision to withdraw will end its presence in Russia for more than 25 years.
BP, Shell and Norwegian Equinor said this week that they intend to leave their Russian business in the event of a billion-dollar blow to their balance sheets. French TotalEnergies has stopped new investments.
– Mark Thompson and Julia Horowitz contributed to the report.