Oil Rises As Focus On Energy Shortage And Russian Bans Intensify

Meanwhile, Total views current climate as ideal time to diversify: File Image/Pixabay

The bullish oil market elements that had been developing earlier in the week - the global diesel crunch and the European Union moving closer to a ban on crude imports from Russia - finally galvanized schizophrenic traders, who on Thursday caused an oil price increase of over 3 percent.

For the record, diesel hit an all-time high of $5.13 on March 12, according to AAA, and as of April 27 the price was only slightly lower at $5.09.

West Texas Intermediate settled 3.3 percent higher after Germany's economy minister said his country has already cut its reliance on Russian oil enough to make a full embargo "manageable."

However, the real impetus for Thursday's gains was the steady tightening of supplies in the wake of the Russian export ban by multiple countries: "The news that the EU is getting close to banning Russian energy imports gave the market a firmer tone, but now heating oil is taking the lead, driving U.S. crude futures higher," said Spencer Vosko, oil director at Liquidity Energy.

As for the bans, Giovanni Staunovo, commodity analyst at UBS Group, explained the last hurdle needed for the EU to act against Russia for its invasion of Ukraine: "The question will be if also Hungary supports it or not to get it through as it needs to be unanimous."

However, while the cumulative impact on Russia is still unclear, the discord between the former Soviet Union and Europe overall will almost certainly cause suffering everywhere else, according to analysts.

Bill Perkins, CEO and head trader at Skylar Capital Management, told media on Thursday that if Russia's move to cut gas supplies to Poland and Bulgaria ends in a full-blown energy blockade, "Europe is going to be scrambling this winter to maintain heating, and just maintain their economies."

MUFG analysts warned that an "immediate interruption" of Russian flows to northwest Europe could raise Title Transfer Facility (TTF) prices above 200 euros per megawatt-hour "for an extended duration."

But surging prices that have defined the energy market in 2022 continue to provide opportunity in some quarters: Patrick Pouyanne, CEO of TotalEnergies, told media on Thursday after his company reported first-quarter profits rising threefold, that "This might be an opportunity to accelerate the transition" to liquefied natural gas products and renewables.