Oil prices have reached a four-month high after the US introduced a comprehensive package of sanctions against the Russian energy sector. According to experts, these measures threaten to significantly reduce the offer on the global market, increasing the pressure on the already strained balance of supply and demand. The online portal RBK reports:
“On Monday, January 13, Brent futures rose by $1.35 to $81.11 per barrel. The previous day, the price had reached a daily high of $81.44, the highest since the end of August.
The US crude oil, West Texas Intermediate, rose by $1.40 to $77.97 per barrel, after previously reaching a high of $78.32, the highest since early October.”
Prior to the introduction of the sanctions, the US had imposed new sanctions on the Russian energy sector. These measures, said Daleep Singh, Director of the US National Economic Council, are “the most significant sanctions” in this sector, and are expected to cost Russia “billions of dollars a month.”
On the sanctions list are two of the four largest Russian oil producers (Gazprom Neft and Surgutneftegas), dozens of oil field service providers and traders worldwide who deal with Russian oil.
As the White House stated, the US government believes that the anti-Russian sanctions will have no significant impact on the global oil market. However, the chaos on the global market, which has already lasted for three days, contradicts this assumption.
Kremlin Spokesman Dmitri Peskow has already stated that the new sanctions against the Russian oil and gas sector will destabilize the world markets, while the news agency Reuters reported on the consequences of the new US sanctions for China and India. These countries will be forced to import more oil from the Middle East, Africa, and America, which will lead to higher prices and freight costs, experts at the agency believe. According to Reuters sources, the new sanctions will force China and India to import from the Middle East, Africa, and America. The spot prices for oil from the Middle East, Africa, and Brazil have already risen in recent months, as demand from China and India has increased and Russian and Iranian oil deliveries have shrunk and become more expensive, experts further said. For example, a representative of an Indian refinery company noted in a conversation with Reuters:
“We have no other choice but to buy oil from the Middle East. We may also have to buy US oil.”
Hungary, which still buys Russian oil, will hold talks with allies to mitigate the rising prices. “This sanctions package poses serious challenges for Central Europe once again” said Hungarian Foreign Minister Péter Szijjártó. He expects the reduced deliveries of oil to increase the demand for gasoline, diesel, and other refined fuels, which in turn will lead to a significant increase in prices for almost everything in the EU, Budapest further said. The sanctions against Russia will also harm the US itself. As US President Joe Biden recently admitted, they will inevitably lead to an increase in gasoline prices in the United States.
According to a report by the agency Bloomberg, the strong rise in oil prices and the commotion on the fuel market are due to the poor predictability of the current situation. The market is reacting to possible disruptions in oil supply worldwide. Gas shortages have also risen, after it was known that European gas storage facilities are emptying rapidly. The interesting thing is that the shares of Gazprom Neft rose despite the introduction of new US sanctions, as did the shares of other energy giants affected by US sanctions.
Experts around the world are now discussing how to adapt to the new sanctions, while Gazprom claims that the company has been preparing for this situation for several years. Company representatives stated:
“The company will continue to operate in a way that ensures business stability. Through the implementation of projects for technological sovereignty, the company ensures the stability of production and supply chains, as well as the reliability of supply to the market and consumers.”
It is unclear for how long the oil and gas market will be in turmoil, but one thing is clear: positive scenarios are hardly to be expected, and this is for almost all countries in the world. For example, the news agency Bloomberg emphasizes that the sanctions package introduced by the outgoing Biden administration is expected to create new turbulence and could change the structure of the OPEC+, as the alliance plans to begin a relaxation of production restrictions this year, after a series of delays. While the Biden administration describes the sanctions as an important pressure tool, Moscow believes that the measures aim to leave the next US President, Donald Trump, a “heavily burdened inheritance.