New York: Oil continued its rally above $125 a barrel after President Joe Biden said the US would ban the import of Russian crude, escalating sanctions against the nation following its invasion of Ukraine.
Futures in New York have soared more than 35 per cent since the war started almost two weeks ago, and settled at the highest since 2008 on Tuesday. The UK said it would also phase out Russian oil imports by the end of the year, but other European nations have been reluctant to commit to similar action.
The war has roiled commodity markets from metals to grains and sparked concerns the global economy is heading for a shock just as countries emerge from the Covid-19 pandemic. Russian oil is being shunned, banks are predicting even higher crude prices and already tight energy markets are being stretched.
Russia is a key member of the OPEC+ alliance and a major producer of crude and petroleum products such as diesel. Mounting sanctions on the nation are prompting supply fears, with fuel prices following oil higher. American gasoline prices rallied to a record Monday, increasing the pain for consumers.
The International Energy Agency said it was talking to oil producers about bringing on extra supply and that there was significant spare capacity that could be tapped. The IEA added that prices could go even higher.
Russian oil made up about 3 per cent of all the crude shipments that arrived in the US last year. When other petroleum products are included, such as unfinished fuel oil that can be used to produce gasoline and diesel, Russia accounted for about 8 per cent of 2021 oil imports. Biden's ban applies immediately to new purchases, according to a senior administration official.
Brent remains in deep backwardation, a bullish structure where near-dated contracts are more-expensive than later ones, indicating tight supply. The global benchmark's prompt spread was $4.50 a barrel in backwardation on Tuesday, compared with $3.02 at the start of last week.
