Oil prices were up sharply but off session highs, surging Monday after the West imposed more sanctions on Russia, a key energy producer, due to its ongoing invasion of Ukraine.
The Wall Street Journal reported that the U.S. and other major oil-consuming countries were weighing the release of 70 million barrels of oil from emergency stockpiles in response to surging crude prices.
West Texas Intermediate crude for April delivery
on the New York Mercantile Exchange was up $3.74, or 4.1%, at $95.33 a barrel after trading as high as $99.10 in earlier activity.
April Brent crude
the global benchmark, was up $2.50, or 2.6%, to $100.43 a barrel, after topping $105 at its session high. The more actively traded May contract
was up $3.84, or 4.1%, at $97.96 a barrel.
Members of the International Energy Agency, a Paris-based group whose members include most industrialized nations, could agree as early as Monday or Tuesday to tap their national strategic oil reserves, the report said, citing European and Persian Gulf officials. The Journal reported it would include 40 million barrels from the U.S.
Oil prices had jumped after the U.S., the European Union and the U.K. over the weekend said they would block some Russian banks from the SWIFT messaging system, a move that makes it more difficult for countries to purchase Russian oil.
The U.S. Treasury on Monday said it’s prohibiting any transactions with the Central Bank of the Russian Federation, as well as Russia’s national wealth fund and the Russian Ministry of Finance.
“While details on the implementation of these additional sanctions have not been released, with carve-outs likely still allowing for energy and food trades, the hurdles that these sanctions will create for financial payments are likely to exacerbate the recent Russian commodity supply shock, already visible as Western and Chinese traders halting shipments,” said analysts at Goldman Sachs.
The Goldman analysts hiked their one-month Brent price forecast to $115 from $95, arguing there would need to be up to 4 million barrels of demand destruction to offset the loss of Russian exports. Even a redirection of oil flows to the East would still tighten global markets, the analysts argue, because it would require a 12-day increase in transit time, the equivalent to the loss of 90 million barrels.
OPEC could respond, the analysts added. “While such an outcome becomes increasingly likely the more Russia is ostracized from the global economy, driving core-OPEC, Iran and the West closer together, it would nonetheless come at the expense of a complete depletion of the global oil market’s spare capacity, still warranting much higher oil prices,” they said.