Oil prices increased on Wednesday as the United States’ ban on Russian oil imports and Britain’s intention to phase them out by the end of the year stoked fears of a global supply shortage.
Brent oil futures were up $2.17, or 1.7%, at $130.15 a barrel, following a 3.9% gain the day before. West Texas Intermediate (WTI) crude futures in the United States were up $1.57, or 1.3%, at $125.27 a barrel, after rising 3.6% on Tuesday.
President Joe Biden ordered an immediate ban on Russian oil and other energy imports on Tuesday, while Britain said it will phase out Russian oil imports by the end of 2022.
Since Russia, the world’s second-largest crude exporter, invaded Ukraine, oil prices have risen by more than 30%. Fears of future interruptions in oil supplies as a result of intensifying sanctions against Moscow have encouraged purchases, according to analysts.
“On top of the U.S. and Britain’s announcement effects, fears of further disruptions of supply from Russia due to intensifying sanctions on Moscow prompted fresh buying,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities.
“But Monday’s highs will likely become a ceiling for the short term as speculative buying is expected to slow down soon and countries in the northern hemisphere are headed to spring when fuel demand drops,” he said.
Oil prices rose to their highest levels since July 2008 on Monday, with Brent reaching $139.13 per barrel and WTI reaching $130.50. The increase was also fueled by anticipation that a fast return of Iranian crude to global markets was doubtful, as discussions between Tehran and global powers on Iran’s nuclear program lagged.
According to analysts at the Oslo-based firm Rystad Energy, global oil prices might soar to $200 per barrel if Europe and the United States ban Russian oil imports.
Still, with oil prices at their highest in 14 years, leading energy executives cautioned on Monday that the post-COVID pandemic fuel demand will be reduced as consumers cut back on spending and travel in response to rising pump and power prices.