Global oil price soars 6% as EU mulls widening sanctions on Russia

EU governments will consider whether to impose an oil embargo on Russia over its invasion of Ukraine as they gather this week with US President Joe Biden for a series of summits designed to harden the West's response to Moscow. File photo

Crude oil prices soared more than 6%, with the global benchmark Brent crude climbing above $115 a barrel, as the EU considered joining the US in a Russian oil embargo. 

EU governments will consider whether to impose an oil embargo on Russia over its invasion of Ukraine as they gather this week with US President Joe Biden for a series of summits designed to harden the West's response to Moscow. 

"It could be the precipice for global trouble supply-wise," said John Kilduff, a partner at Again Capital. Ukraine defied a Russian demand that its forces lay down arms before dawn in Mariupol, where hundreds of thousands of civilians have been trapped in a city under siege and already laid to waste by Russian bombardment. 

With little sign of the conflict easing, the focus returned to whether the market would be able to replace Russian barrels hit by sanctions.

"Optimism is seeping away about progress in talks to achieve a ceasefire in Ukraine and that’s sent the price of oil on the march upwards," Susannah Streeter, senior markets analyst at UK-based asset manager Hargreaves Lansdown, said.

Meanwhile, over the weekend, attacks by Yemen's Iran-aligned Houthi group caused a temporary drop in output at a Saudi Aramco refinery joint venture in Yanbu, feeding concern in a jittery oil products market, where Russia is a major supplier and global inventories are at multi-year lows. 

Saudi Arabia said it would not be responsible for any global oil supply shortages after these attacks. The latest report from the Organisation of the Petroleum Exporting Countries and allies, including Russia, showed some producers are still falling short of their agreed supply quotas. 

Oil prices were also sensitive to talk of Hong Kong lifting Covid-19 restrictions, which could increase demand, and in response to the growing list of US companies retreating from Russia - including Baker Hughes, ExxonMobil, Shell, and BP. 

The prices of wheat and corn futures also jumped in the US, with traders saying that exports from the Black Sea region will continue to be disrupted this week due to the fighting in Ukraine.

Soybean futures also rose sharply, following gains in the crude oil market that also stemmed from major ructions to energy shipments related to the Russia-Ukraine conflict. 

Reuters