By Adedapo Adesanya
The threat by the West to impose fresh sanctions on Russia on Wednesday triggered over a 2 per cent rise in the price of crude oil on the global market.
The Brent crude gained $2.34 or $2.12 per cent as a result of the development to trade at $112.60 per barrel, while the United States West Texas Intermediate (WTI) crude rose by $3.26 or 3.13 per cent to $107.50 per barrel.
Oil slumped at the previous session after signs emerged that the resumption of the Russia-Ukraine peace talks after two weeks may have been constructive.
During the talks in Istanbul on Tuesday, Russia promised to significantly scale back its military operations and activity around Kyiv and in the northern city of Chernihiv. Ukraine, for its part, proposed it would keep a neutral status and would not join alliances or host troops of other countries on its territory.
However, the energy markets in Europe were bracing for potential disruption to the Russian natural gas supply ahead of a March 31 deadline Russian President Vladimir Putin had given for the country to arrange for payments in its local currency for gas.
In addition, Russia signalled that it could soon demand Rubles for other exports, including those of oil, metals, and grains.
This is happening as the United States and its allies plan new sanctions on more sectors of Russia’s economy, including military supply chains.
Analysts pointed out that in a worst-case scenario, the market could face an additional 1 million barrels per day of Russian production at risk if relations with Europe worsen and an oil ban is put in place.
Oil also gained as the US Energy Information Administration (EIA) reported U.S. crude stockpiles fell by a bigger-than-expected 3.4 million barrels last week.
This draw cut inventories in the world’s top consumer to 410 million barrels, their lowest since September 2018, government data showed.
Meanwhile, European countries have started to implement plans to manage gas – a by-product of crude oil due to supply cuts from Russia with the continent’s largest economy, Germany triggering an emergency plan to manage gas necessities.
Greece called an emergency meeting of suppliers, the Dutch government said it would urge consumers to use less gas and the French energy regulator told consumers not to panic.
Major oil producers are likely to stick to their scheduled output target increase of about 432,000 barrels per day when the Organisation of the Petroleum Exporting Countries and allies (OPEC+), including Russia, meets on Thursday, March 31.
However, weakening demand in the largest importer China is pressuring oil prices, as the country has tightened mobility restrictions and COVID-19-related lockdowns in multiple cities including the financial hub of Shanghai.
Dipo Olowookere