Oil surges with growing supply fears as EU considers Russian ban

Oil rose for a third day as the war in Ukraine neared the one-month mark with no conclusion in sight.

Oil rose for a third day as the war in Ukraine neared the one-month mark with no conclusion in sight.

Futures in New York rose as much as 6.5 per cent, trading near US$111 a barrel. Several European Union countries are pushing for a fifth round of sanctions on Russia, though some remain opposed to including oil in those measures. The Kremlin said an EU ban on oil imports from Russia would have a profound effect on the global crude market and hit the continent the hardest. 

In weeks prior, the EU sanctioning Russian oil “seemed unrealistic given their reliance on Russian energy supply,” said Rohan Reddy, a research analyst at Global X Management, a firm that manages US$2 billion in energy-related assets. If sanctions were instilled, “it would basically shave off a full 4-5 per cent of global oil supply,” as “Europe bought up around 40-45 per cent of Russia’s total oil production in 2021.”

The global oil market has been thrown into turmoil by Russia’s invasion of Ukraine, with the U.S. and Europe imposing sanctions on Moscow and crude buyers shunning the country’s cargoes. Brent neared US$140 a barrel earlier this month to hit the highest since 2008, before seeing a massive pullback that briefly put the market into bear territory. Prices have seen unprecedented volatility, with frequent intraday swings of about US$10 and broader commodity markets seizing up amid a widespread liquidity crunch. 

The rally in oil prices has spurred importing nations to pressure other producers to step up supply, including members of the Organization of Petroleum Exporting Countries. During the weekend, Japan urged the United Arab Emirates to increase exports. Meanwhile, oil giant Saudi Aramco plans to raise spending as it seeks to boost output.