Brent Breaches $100 As Sanctions Against Russia Intensify

Goldman Sachs believes there is ample room for further market tightness: File Image/Pixabay

With economic sanctions against Russia for its invasion of Ukraine increasing in volume and severity, fears of energy disruption reached new highs on Monday, and oil prices accordingly jumped  by over 4 percent.

Brent settled up $3.06, or 3.1 percent, at $100.99 per barrel; the more active Brent contract, for May delivery, was up $3.14 at $97.26; West Texas Intermediate settled up $4.13, or 4.5 percent, at $95.72.

Jim Ritterbusch, president of Ritterbusch and Associates, worried that  "The tight global oil market could become even tighter following last week's Russian invasion of Ukraine."

To which Carsten Fritsch, analyst at Commerzbank, added, "Russia could retaliate to these harsh measures by reducing or even completely suspending energy shipments to Europe."

Indeed, Goldman Sachs in a note to clients stated that, "The range of near-term price outcomes for commodities has become extreme, given the concern of further military escalation, energy sanctions, or potential for a cease-fire."

The bank raised its one-month Brent crude oil price forecast to $115 per barrel from $95 per barrel previously, with "significant upside risks on further escalation or longer disruption."

Disruption on Monday seemed all but inevitable, with BP, Shell, HSBC, and the world's biggest aircraft leasing firm AerCap joining a growing list of companies disavowing all business dealings with the former Soviet Union; also, large swaths of the Russian economy will be off limits for Western banks and financial firms after the decision was made to cut off some banks from SWIFT.

Plus, Bloomberg reported that the conflict has caused freight rates for hauling crude from Russia to surge due to the risks of carrying cargoes on those routes – and a scramble for alternative supplies is boostingrates for other passages.

Still, despite the enormous potential for things to become even tighter in energy circles, it was expected that when the Organization of the Petroleum Exporting Countries (OPEC) meets on Wednesday it will stick adding 400,000 barrels per day (bpd) of supply in April and no more.

Ironically, the cartel in a technical committee report revised down its forecast for the 2022 oil market surplus by about 200,000 bpd to 1.1 million bpd – an acknowledgment of just how tight global supplies have become.

The report also showed stocks in the developed world standing at 62 million barrels below the 2015 to 2019 average by the end of the year.