Live updates: follow the latest news on Russia-Ukraine
Oil prices touched their highest level since 2008 on Tuesday, surging past $130 a barrel, after US President Joe Biden banned crude, gas and coal imports from Russia in retaliation to Moscow's military offensive in Ukraine.
The UK also said it will suspend the imports of Russian oil and oil products in a phased manner by the end of 2022, and is also considering a ban on natural gas from Moscow.
Following the move by Washington and London, Russian President Vladimir Putin signed a decree that restricts the import and export of specified goods and raw materials, according to lists determined by the Russian government, which will be in effect until the end of this year, Interfax news agency said.
No further details were provided.
The turn of events led to a brief rally in oil prices on Tuesday and prices have remained at 14-year highs on Wednesday.
Brent, the global benchmark for two thirds of the world's oil, was trading 0.95 per cent higher at $129.20 a barrel at 1.20pm UAE time on Wednesday, while West Texas Intermediate, the gauge that tracks US crude, was up 0.44 per cent trading at $124.20.
Brent hit a record high of $147.02 on July 11, 2008 amid the global financial crisis, while WTI rose to $146.90 the same day.
While the tightening of US sanctions has certainly shaken the market, a bigger impact will be felt if Europe follows suit and bans Russian crude imports.
In 2021, the EU imported 155 billion cubic metres of natural gas from Russia, accounting for about 45 per cent of its gas imports and close to 40 per cent of its total consumption, according to the International Energy Agency.
Moscow has also said it retains the option to cut natural gas supplies to Europe through the Nord Stream 1 pipeline if the EU bans its crude imports.
Russia's Deputy Prime Minister Alexander Novak, who is also in charge of energy affairs, issued a warning that prices could go beyond $300 a barrel if the EU follows in the footsteps of the US and the UK, forcing Moscow to retaliate.
Meanwhile on Tuesday, at the energy industry's CeraWeek conference in Houston, Texas, Occidental chief executive Vicki Hollub said oil may reach $150 a barrel due to the Russia-Ukraine conflict.
Threats of additional energy sanctions on Russia and price forecasts are doing little to ease market volatility, so where are oil prices headed?
-
A Ukrainian serviceman walks past the vertical tail fin of a Russian Su-34 bomber lying in a damaged building in Kharkiv, Ukraine. AP Photo -
An apartment building damaged after shelling in Kharkiv, Ukraine. AP Photo -
A woman puts her head in her hands as she sits on a cot in a shelter, set up for displaced persons fleeing Ukraine, inside a school gymnasium in Przemysl, Poland. AP Photo -
Belarussian and suspected Russian helicopters on the flight line at Machulishchy Air Base outside Minsk, Belarus. AP Photo -
Children look on as people fleeing Russia's invasion of Ukraine shelter in a school, in Drohobych, Ukraine. Reuters -
Families eat in the shelter. Reuters -
A woman looks out from a building damaged by Russian shelling in Mykolaiv, 100 kilometres away from Odesa, western Ukraine. AFP -
A wounded Ukrainian man waits in the corridor of the central hospital of Mykolaiv. AFP -
An elderly woman is carried in a shopping cart after being rescued from Irpin, on the outskirts of Kyiv, Ukraine. AP -
A woman reacts as a train carrying children from Kyiv's Central Children's Hospital leaves the Ukrainian capital on its way to Lviv. Reuters -
A girl sits in an improvised bomb shelter in Mariupol, Ukraine. AP -
An elderly woman is coated in snow as she sits in a wheelchair after being rescued from Irpin. AP -
Belarusian volunteers take part in military exercises at the Belarusian Company base in Kyiv. AP -
Lessa, left, director of a nursery school turned into a refugee shelter, cries as she hugs Olega, who arrived from Kyiv with her baby, near Lviv. EPA -
Ukrainians pass a damaged bridge as they flee from Irpin. AP -
A man carries an elderly woman as people continue to leave Irpin. AP -
A soldier stands on a barricade made of sandbags in central Odesa, Ukraine. Reuters -
A charred Russian tank and captured tanks in the Sumy region. Reuters -
People rest at a temporary shelter for Ukrainian refugees in Przemysl, Poland. AFP -
Ukraine's ambassador to the Netherlands, Maksym Kononenko, third right, and his wife Tetiana Doroshenko, fourth left, attend a meeting of members of the Ukrainian community with Dutch King Willem-Alexander, third left, and Queen Maxima, second left, to discuss the situation in Ukraine, in The Hague. EPA -
A Ukrainian soldier looks at the destruction after shelling in Ukraine's second-largest city of Kharkiv. AFP -
A refugee holds her dog as they wait for trains to Poland in Lviv, Ukraine. Reuters -
A woman ties ribbons in Ukrainian national flag colours in a girl's hair as people wait at a refugee assistance centre in Prague, Czech Republic. EPA -
A Ukrainian soldier carries an elderly woman crossing the Irpin river on the outskirts of Kyiv. AP -
Lena, who had never left Ukraine before fleeing into Moldova, feeds Dasha, 3, soon after crossing the border. Erin Clare Brown for The National -
Refugees without immediate plans to move further inland can stay the night in tents set up on Moldova's side of the border. Erin Clare Brown for The National -
Tatiana and her son wait for a van that will carry them from the Moldovan border to Chisinau. Erin Clare Brown for The National -
Each night, the Palanca refugee camp in Moldova feeds up to 300 people who arrive with no onward plans. Erin Clare Brown for The National -
People pass a damaged bridge while fleeing the town of Irpin, close to the Ukrainian capital of Kyiv. AP -
A Ukrainian soldier stands guard next to a church in Irpin. EPA -
A firefighter holds the baby of a Ukrainian refugee at the border in Romania. AP -
Ukrainian President Volodymyr Zelenskyy speaks in Kyiv. Reuters -
A Ukrainian soldier at a checkpoint in Kyiv. AP -
Ukrainian activist Ihor Mazur, left, a veteran of the war in the country's east, looks at a night-vision device in Kyiv. AP -
Ambassadors attend a UN Security Council meeting on threats to international security after Russia's invasion of Ukraine, in New York. Reuters -
Ukraine's UN ambassador Sergey Kyslytsya holds a paper with an image of Russia's Foreign Minister Sergey Lavrov as he addresses the Security Council in New York. Reuters -
A road sign put up in support of Mr Zelenskyy outside Russia's embassy in Washington. AFP -
Ukrainian refugees at the train station in Lviv, western Ukraine. EPA -
Lethal and non-lethal Ukrainian aid is loaded on to a plane bound for Poland by Canadian soldiers in Trenton, Ontario. Reuters -
Volunteers carry medical aid and necessities at a train station in Lviv. EPA -
Everton players wear T-shirts in support of Ukraine as they warm up for an English Premier League football match against Tottenham Hotspur. AP -
A residential building damaged by Russian shelling in Chernihiv, Ukraine. Reuters -
A man walks past a checkpoint in heavy snow in Lviv. Getty -
A man fleeing fighting in Irpin waits to cross a river after Russian forces entered the city. Getty -
Soldiers assist Irpin residents underneath a damaged bridge as they flee. Getty -
Ukrainian civilians who volunteered to join the Territorial Defence Forces take part in a training exercise in Odesa after Russia's invasion. Reuters -
Men carry a body to a lorry as people flee from the frontline town of Irpin. EPA -
A Ukrainian police officer runs with a child as the sound of shelling echoes nearby in Irpin. AP -
Parents and children struggle to board a train in Lviv. AP
Here is what analysts have to say:
Bjornar Tonhaugen, head of oil markets at Rystad Energy
Oil prices could hit $240 per barrel this summer in the worst-case scenario if western countries roll out sanctions on Russia’s oil exports en masse. Market volatility is at an all-time high, with prices surging on the expectation that supply will further tighten due to restrictive sanctions.
Traders, analysts and decision-makers alike should prepare for elevated prices based on the current landscape. This is the largest energy crisis in decades and the impact on the world’s most important commodity is going to be unprecedented.
If more western countries join the US and impose oil embargoes on Russia, it would create a 4.3 million barrels per day (bpd) hole in the market that simply cannot be quickly replaced by other sources of supply.
If 4.3 million bpd of Russian oil exports to the west are halted by April 2022, and where China and India only keep current import levels intact, Brent would need to spike to $240 per barrel by the summer of 2022 to destroy demand.
This collapse would be the largest potential oil supply shortage since the 1990 Gulf War, when oil prices doubled.
Edward Bell, senior director of market economics at Emirates NBD
Oil markets are going to essentially price out Russian exports following the import ban announced by the US and UK overnight. While Russia may continue to produce oil and export it for now, it is essentially going to be untouchable as no part of a trade — whether it is the trader, ship operator, insurer, bank [or] port — will want to risk the threat of US sanctions.
So, oil markets will move to a larger “perceived” shortfall even if the physical market doesn’t see an imminent change.
With that in play, the near-term risks for oil are skewed substantially to the upside and a retest of the $139 per barrel level that we saw earlier this week would probably be the first stop on the way higher. If there is no relief via higher production from other Opec+ countries, which so far hasn’t been the case, then oil prices could certainly test higher and a push to $150, above the peak hit in 2008, could certainly be feasible.
Monica Malik, chief economist at Abu Dhabi Commercial Bank
The direct impact of the US ban on Russian oil imports is expected to be relatively limited but the market is increasingly concerned about supply disruptions to Europe. The oil price is expected to remain highly volatile with the fast changing developments.
In the worst case scenario, a sustained disruption of oil exports from Russia and no new counterbalancing supply could push the oil price well above $150-per-barrel level and towards $200. However, this would result in meaningful demand destruction and there are also many other scenarios in between. Any gas disruption will be harder to cover.
Giovanni Staunovo, strategist at UBS
While the US (around 700,000 barrels per day) and the UK (nearly 200,000 bpd) crude and oil product imports are small in the oil market, with demand north of 100 million bpd ... in a tight oil market with falling oil inventories and dwindling spare capacity, any barrel which gets disrupted is one missing barrel.
Another concern of market participants is that other countries might follow and implement a ban. The magnitude of the price response depends also on how much Russian barrels get disrupted. While we likely will see a stronger supply response driven by higher prices (for example, US shale), those barrels will only come with a delay and not help in the near term.
Ipek Ozkardeskaya, senior analyst at Swissquote
The joint decision by the US and the UK to ban the Russian oil sent another shockwave to commodity prices yesterday.
European natural gas prices spiked to [record] highs and crude oil rallied to the $130 mark but the rise was manageable, confirming that the embargo on Russian oil was already widely priced in. Therefore, the market reaction to the Russian oil ban hints that the upside potential may be exhausted in the short run.
In the medium-to long-run, we may see an advance to the $140 to $150 range if the war in Ukraine continues. Yet, a sustained move above these levels would bend the global recovery, hit global demand and trigger a meaningful downside correction to more affordable levels.
Still, I wouldn’t short oil now as the positive trend is very strong and swimming against such a strong tide could hurt.
Ehsan Khoman, head of emerging markets research at MUFG Bank
The US and UK joined Canada in banning imports of Russian oil, rubber-stamping the 'self-sanctioning' that has been taking place among buyers, finance houses and shipbrokers that have been increasingly skittish to move the nation's barrels ever since the first iteration of sanctions were rolled out.
Critically, while the move is symbolic — given the trivial amount of Russian crude and products that both the US and UK import — the formalised sanctions signal a drawn-out conflict with insurmountable implications for global oil markets over the coming months ahead.
The sheer velocity of Russian crude and refined products exports that are either now off the market — through 'self-sanctioning' or sanctions outright — will march oil prices to $180 a barrel by the summer, if not earlier.
Jeffrey Halley, senior market analyst at Oanda
The [US'] move was well telegraphed, with oil markets having already moved higher this week in anticipation. What stopped any further squeeze was the entirely sensible decision by Europe not to follow the US lead. Quite simply, the eurozone cannot instantly replace Russian imports, but one can be sure they will over time.
But European markets remain vulnerable to unilateral energy bans coming the other way from Moscow.
For all the $200 a barrel predictions, which would certainly cause a recession around the world, I harbour doubts we will see those levels. The price for replacing Russian energy will be some countries and sectors coming in from the cold, and I have no doubt that will happen.
I don’t rule out $150 per barrel for Brent crude but unless Russia ups the stakes or the West decides to [impose a] no-fly zone over Ukraine, I am not having $200 [a barrel] nightmares at night.
-
Sony's game division and Nintendo said they have suspended shipments of software and hardware to Russia. Nintendo said it is suspending shipping all products to Russia "for the foreseeable future... due to considerable volatility surrounding the logistics of shipping and distributing physical goods." AFP -
Rio Tinto said it "is in the process of terminating all commercial relationships it has with any Russian business". It has an alumina joint venture with Moscow-based United Rusal International. Reuters -
McDonald's is temporarily closing all 847 of its restaurants in Russia. AFP -
Starbucks is suspending all business activity in Russia, including shipments of its products and cafes run by licencees. AFP -
Coca-Cola is suspending sales in Russia. Coca-Cola said its business in Russia and Ukraine contributed about 1 to 2 per cent of the company's net operating revenue in 2021. Reuters -
PepsiCo is suspending sales of its sodas in Russia. It said it would continue to sell daily essentials, such as milk and other dairy offerings, baby formula and baby food, in Russia. Getty Images / AFP -
Yum Brands, behind KFC and Pizza Hut, also said it was suspending investment in Russia. Reuters -
Toyota is halting production at its plant in St Petersburg, and will halt vehicle shipments to Russia. Reuters -
Ikea said it would suspend its activities in Russia and Belarus, affecting nearly 15,000 employees, 17 stores and three production sites. AFP -
Honda will stop exports of cars and motorcycles to Russia. EPA -
Jaguar Land Rover has paused the delivery of its cars to Russia due to "trading challenges". -
Airbus is suspending sale of parts and support services to airline customers in Russia. Reuters -
Boeing has suspended major operations in Moscow and temporarily closed its office in Kyiv. It is also suspending parts, maintenance and technical support services for Russian airlines. Reuters -
Nike has made merchandise purchases on its website and app unavailable in Russia as it cannot guarantee delivery of goods to customers in the country, an update on the sportswear maker's website showed. Bloomberg -
German sportswear company Puma has stopped deliveries to Russia, but its 100 stores are open. Getty Images -
Shell is to exit all its Russian operations, including a major liquefied natural gas plant. The company also plans to end its involvement in the Nord Stream II gas pipeline from Russia to Germany. PA -
BP is exiting its 19.75 per cent shareholding in Russian oil giant Rosneft after pressure from the UK government. BP has operated in Russia for more than 30 years. Reuters -
ExxonMobil will cease operations in Russia and refrain from making new investments in the country. It holds a 30 per cent stake, alongside Rosneft, Japan's Sodeco and India's ONGC Videsh, in the Sakhalin Island oil and gas fields in Russia’s far east. Its business in the country is valued at more than $4 billion. AFP -
Eni said it would withdraw from the Blue Stream gas pipeline linking Russia to Turkey, in which it has a 50 per cent stake. The company controls the gas pipeline -- which links the two countries via the Black Sea -- equally with Russian energy giant Gazprom. Reuters -
British Gas owner Centrica has said it will exit gas supply agreements with its Russian counterparts, including Gazprom. Centrica said it currently has a medium-term contract with Gazprom Marketing and Trading, the Russian energy company's UK entity, through which gas can be sourced from the open market. Reuters -
Norwegian energy group Equinor said it will start the process of divesting from its joint ventures in Russia. Reuters -
HSBC said it was starting to wind down relations with a host of Russian banks including the second-largest, VTB, one of those targeted by sanctions, a memo seen by Reuters showed. AFP -
Volkswagen suspended deliveries of cars to dealers in Russia. 'Deliveries are to resume as soon as the effects of the sanctions imposed by the European Union and the United States have been clarified', a VW representative said. AP -
Swedish automaker Volvo Cars said it would suspend car shipments to the Russian market until further notice, becoming the first international car maker to do so. Supplied -
GM said it would suspend all vehicle exports to Russia until further notice. The Detroit company does not have plants in Russia, only sells about 3,000 vehicles annually in the country and has limited supply-chain exposure. AFP -
Danish shipping giant Maersk said that it would stop taking new non-essential orders to and from Russia, owing to sanctions imposed over Moscow's invasion of Ukraine. AFP -
Singapore-headquartered container shipping company Ocean Network Express has suspended bookings to and from Russia. Reuters -
AerCap Holdings, the world's biggest plane lessor with about 5 per cent of its fleet leased to Russian airlines, said it will stop trading with Russian customers. Reuters -
US-based United Parcel Service said it is halting delivery services to Russia and Ukraine. Bloomberg -
FedEx also said it is temporarily suspending inbound and outbound services to Ukraine and inbound services to Russia until further notice. AP -
Microsoft said it would remove Russian state-owned media outlet RT's mobile apps from its Windows App store and ban ads on Russian state-sponsored media. Reuters -
Google has barred RT and other Russian channels from receiving money for ads on websites, apps and YouTube videos. Reuters -
German heavy-goods vehicle group Daimler Truck has said it will cease its co-operation with Russian lorry-maker Kamaz. AFP -
Motorcycle maker Harley-Davidson has suspended shipments of its bikes to Russia. Pictured, Russian President Vladimir Putin. Reuters -
Facebook owner Meta Platforms has restricted access to accounts run by Sputnik and RT in the EU. Reuters -
Apple has paused all product sales and limited the functionality of other services in Russia. Reuters
Naeem Aslam, chief market analyst at Avatrade
The only easy fix for banning Russian oil is to have more oil production from two countries with which the US doesn't have great relations, Iran and Venezuela.
Traders fear that current decisions taken by the US and its allies are likely to accelerate the economic slowdown trends as the current sanctions are mainly about disrupting supply chains. In addition, sanctions are also driving up energy and food prices, further flattening the yield curve.
Previous recessions chiefly created shocks on the demand side, and those shocks were mitigated by lowering interest rates, purchasing bonds, lowering taxes. However, the current invasion by Russia of Ukraine and the subsequent sanctions are supply-side shocks that have reduced global production capacity and, thus, cannot be offset in the same way. This particular fear keeps traders on edge and brings mammoth volatility to the market.
Han Tan, chief market analyst at Exinity
Oil benchmarks have persisted with their parabolic climb, with Brent still trading around its highest levels since 2008 and making further headway towards the psychologically important $140 level.
Over the near-term, Brent futures could breach their 2008 peak if more countries join in the ban on Russian oil imports, further exacerbating the supply crunch. A Russian curve ball that scuppers the Iran nuclear deal’s prospects may also trigger a knee-jerk spike in oil benchmarks.
Yet, oil’s surge cannot continue indefinitely. The US and UK’s decision to ban imports of Russian oil is set to fan the flames of global inflation, which in turn raise the spectre of demand destruction.
