U.S. Secretary of State Antony Blinken said the Biden administration and its allies are discussing an embargo of Russian oil, a move that threatens to make an already heated oil market even more volatile.
Pressure is growing on the U.S. to hit back harder at the invasion of Ukraine by squeezing exports from Russia’s key energy industry. While traders, shippers, insurers and banks are increasingly wary of taking on or funding purchases of Russian barrels, an embargo could extend crude’s record gain last week.
“We are now talking to our European partners and allies to look in a coordinated way at the prospect of banning the import of Russian oil, while making sure that there is still an appropriate supply of oil on world markets,” Blinken said on CNN’s “State of the Union” on Sunday. “That’s a very active discussion as we speak.”
Vitol Group, world’s biggest independent crude trader, said the oil market could tighten further with disruptions to Russian flows and as producers such as Libya experience supply problems.
Futures in New York rose by more than $24 last week, the highest weekly dollar increase on record. Brent traded in its biggest range since the launch of the futures contract in 1988 — eclipsing the wild swings in the financial crisis of 2008 and when demand plunged in the coronavirus pandemic.
Prices could push higher still after exceeding $118 a barrel on Friday.
“I don’t think we’ve priced everything in yet,” Mike Muller, Vitol’s head of Asia, said Sunday on a podcast produced by Dubai-based consultant and publisher Gulf Intelligence. “We have plenty of twists and turns to come.”
JPMorgan Chase & Co. said global benchmark Brent crude could end the year at $185 a barrel if Russian supply continues to be disrupted, and some hedge funds are eyeing $200. Goldman Sachs Group Inc. said that without Russian barrels on the market, oil could reach $150 in the next three months.
Libya’s oil production has dropped as a political crisis derails the OPEC member’s industry. Output in the country, which has Africa’s biggest crude reserves, fell to 920,000 barrels per day, Oil Minister Mohamed Oun said in a response to a query from Bloomberg News. It stood at roughly 1.2 million barrels on Wednesday.
Markets are also closely watching negotiations between Iran and the International Atomic Energy Agency, which took a tentative step forward over the weekend. While that could eventually pave the way for the return of the country’s oil to global markets by the third quarter this year, a final deal has yet to be secured.
Elsewhere, the OPEC+ cartel has so far resisted calls from importers including the U.S. for faster production increases. The 23-nation group, led by Saudi Arabia and Russia, is raising output only gradually after historic cuts at the start of the pandemic. That could change if prices continue climbing, according to Vitol.
“At some price they will say: ‘OK, I think our COVID response from 2020 is history now and let’s get to focusing on the fundamentals of today’s market,’” Vitol’s Muller said.
