Energy
Friday, October 13th, 2023 1:49 pm EDT
Key Points
- Oil Prices Surge: Oil prices rose by over 4% in response to the United States tightening sanctions on Russian crude exports, adding to concerns in an already tight energy market. International benchmark Brent crude futures for December delivery increased by 4% to reach $89.4 per barrel, while November U.S. West Texas Intermediate crude futures climbed 4.1% to $86.3 per barrel.
- Sanctions on Russian Oil: The U.S. imposed sanctions on two shipping companies accused of violating the G7’s oil price cap, a mechanism designed to allow a steady supply of Russian oil while limiting its revenue. This move aimed to curtail the funds available to the Kremlin without disrupting the oil supply. The G7, Australia, and the EU implemented a $60-per-barrel price cap on Russian oil, accompanied by a ban on seaborne imports of Russian crude oil.
- Israel-Hamas Conflict: Market participants are closely watching the impact of the escalating Israel-Hamas conflict on regional energy production. While the Middle East is responsible for over a third of global seaborne trade, the International Energy Agency (IEA) stated that the conflict has not yet directly affected physical oil supply. The IEA assured that it is prepared to act to ensure adequate oil supply in the event of a sudden shortage, which includes member countries releasing emergency oil stocks and implementing demand restraint measures.
Oil prices surged more than 4% following the United States’ decision to tighten sanctions on Russian crude exports, heightening concerns about an already tightly balanced energy market. International benchmark Brent crude futures for December delivery traded at $89.4 per barrel, while November U.S. West Texas Intermediate crude futures rose 4.1% to $86.3 per barrel.
The price increase came after the U.S. imposed sanctions on two shipping companies that violated the G7’s oil price cap, designed to maintain a stable supply of Russian oil in the market while limiting Russia’s revenue from oil trade. The G7, Australia, and the EU had implemented a $60-per-barrel price cap on Russian oil in December, alongside a ban on seaborne imports of Russian crude. These measures aimed to significantly curb the fossil fuel export revenue funding Russia’s war in Ukraine.
The U.S. Department of the Treasury’s Office of Foreign Assets Control imposed sanctions on two tanker owners: one in Turkey and one in the United Arab Emirates. The YasaGolden Bosphorus tanker, owned by Turkey-based Ice Pearl Navigation Corp, carried crude oil priced above $80 a barrel after the price cap came into effect. The SCF Primorye, owned by UAE-based Lumber Marine SA, transported Russian oil priced above $75 a barrel from a Russian port after the price cap mechanism was implemented.
Market participants are also monitoring the Israel-Hamas conflict, which has raised concerns about its potential impact on regional energy production. While the Middle East accounts for over a third of global seaborne trade, the International Energy Agency (IEA) stated that the Israel-Hamas war has not yet had a direct effect on physical supply. The IEA assured that it is prepared to act to ensure markets remain adequately supplied in the event of a sudden supply shortage, including member countries releasing emergency stocks or implementing demand restraint measures.
Israel is not a significant oil producer, and no major oil infrastructure is near the Gaza Strip. However, the ongoing geopolitical conflicts have introduced substantial uncertainty into the energy market, contributing to the upward pressure on oil prices.
For full original article on CNBC, please click here: https://www.cnbc.com/2023/10/13/oil-prices-crude-futures-rise-after-us-tightens-sanctions-on-russia.html
