
Oil Surges Over 5% Amid Intensifying Russia-EU Energy Dispute – Reuters
By David Gaffen
NEW YORK (Reuters) – Oil prices climbed over 5% on Wednesday following a decline in Russian gas flows to Europe and Russia’s imposition of sanctions on several European gas firms, which intensified uncertainty in global energy markets.
Since Russia’s invasion of Ukraine in February, oil and gas prices have continued to rise, exacerbated by heavy sanctions imposed by the United States and its allies. The crude trade has been reduced significantly, with Russia threatening to halt its gas supplies to Europe, although it has yet to take that step.
Gas exports from Russia to Europe via Ukraine experienced a 25% drop after Kyiv suspended a major transit route, citing interference by Russian occupying forces. This marked the first significant disruption of exports through Ukraine since the invasion began.
This development has reignited fears of further interruptions, especially as prices continue to soar. On Wednesday, Russia sanctioned 31 companies from nations that imposed sanctions on it after the invasion.
Brent crude advanced by $5.05, or approximately 4.9%, settling at $107.51 a barrel, while U.S. West Texas Intermediate crude increased by $5.95 to $105.71, marking a 6% gain.
The European Union has indicated the possibility of implementing a full embargo on Russian oil, although discussions are ongoing. As Russia stands as the largest exporter of crude and fuel, the expected worsening of disruptions has driven markets tighter globally, particularly for refined products such as diesel.
"Prices are likely to continue upward, especially if the European Union finalizes plans to phase out Russian oil purchases throughout this year," stated Andrew Lipow, president of Lipow Oil Associates in Houston.
The EU is still negotiating the potential oil embargo, which analysts believe would further tighten the market and alter trade flows. Unanimous support is required for the vote, but progress has stalled as Hungary remains opposed.
Recent data on U.S. inventories highlighted the factors fueling price increases. While overall stocks rose by more than 8 million barrels—primarily due to a release from strategic reserves—gasoline inventories fell by 3.6 million barrels, along with a decline in distillate stocks.
U.S. refining capacity has decreased, leading the country to increase its exports to meet international demand. So far in 2022, the U.S. has been exporting approximately 4 million barrels of fuel daily.
"The utilization rate numbers are not what they used to be due to reduced overall capacity," noted Tony Headrick, an energy market analyst at CHS Hedging. "Refiners are struggling to keep pace with gasoline demand."
The price of crude has surged throughout 2022 amid supply concerns stemming from Russia’s invasion of Ukraine, with Brent crude reaching $139 in March, the highest level since 2008. Concerns regarding economic growth, driven by China’s COVID-19 restrictions and U.S. interest rate hikes, have contributed to recent price fluctuations.