Wednesday Roundup: Oil soars following global sanctions against Russia; Biden calls out Putin, says he ‘will pay dearly’; What to watch for this week

by Market Updates and Alerts |

Oil hits $110 with global sanctions against Russia 

Oil prices extended a relentless rally above $110 a barrel ahead of an OPEC+ meeting, with signs that the disruption to Russian supplies is worsening. Futures in London and New York jumped above the intraday threshold, with West Texas Intermediate (WTI) hitting the highest level since 2013. The market structure shifted into a super pullback, indicating extreme scarcity, while prices also rose through large options strikes, exacerbating price swings.

Russia’s top Ural crude oil went on sale at a record discount but got no bidders, the latest indication that oil trading from the country’s western ports is stalling. Consultant Energy Aspects said about 70% of the Russian oil trade is currently frozen amid bank sanctions, rising freight rates, and broader political risks. 

The global oil market had already tightened significantly before the invasion, after economies rebounded strongly from the pandemic. The interruption of Russian exports has the potential to drive up oil prices even further. Traders are paying more in years betting this will happen, while banks like Morgan Stanley have ramped up short-term forecasts.

In a bid to cool prices, the International Energy Agency announced a strategic release of oil reserves, but so far has done little to tame a runaway market. The situation across the energy sector is very serious, IEA Executive Director Fatih Birol said Tuesday.

“The next frontier of oil prices will be defined by prices in pursuit of demand destruction,” RBC Capital Markets analysts, including Michael Tran, wrote in a note to clients. “Two weeks ago, our forecast of $115 a barrel through the summer looked aggressive, in light of the ongoing fundamental tightening structure, infused by geopolitics, there may be more risk to the upside.

Oil prices

  • Brent for May settlement rose 6.4% to $111.64
  • WTI for April delivery advanced 6.4% to $110.02.

Brent remains in a deep retracement, a bullish structure where immediate barrels are more expensive than later-date shipments, indicating nervousness about the supply tightening. The immediate benchmark spread was $5.02 per barrel, a level never seen before this century.

Russia’s invasion is entering a new deadly phase, which could result in more sanctions. President Joe Biden grapples with pressure from lawmakers on both parties to cut US imports of Russian oil and gas to increase the cost to Russia, which would likely give global prices another boost.

Biden calls Putin a ‘dictator’, says he ‘will pay dearly’ for aggression against Ukraine 

The US and its allies were prepared for Russia’s invasion of Ukraine and “dictators” must pay a price for their aggression, President Joe Biden said in his first State of the Union address on Tuesday.

“Russian President Vladimir Putin’s war was premeditated and unprovoked,” Biden added, defending the West’s efforts to cripple the Russian economy with sanctions as well as arms supplies to Ukraine’s military.

In a show of solidarity with Kyiv, Ukraine’s ambassador to the US, Oksana Markarova, was invited to the speech. Biden also announced that the US is closing its airspace to Russian airlines, following the example of more than a dozen European countries.

The war in Ukraine has forced the White House to reframe some of what is traditionally a discourse focused on domestic issues. Biden warned that without imposing harsh punishments on Putin, his expansionist ambitions could extend further into Europe.

Biden advocated measures to boost the industry, strengthen supply chains, reduce health care and elderly care costs, and reduce the federal budget deficit. It’s a set of policies that may aim to rally support from moderates like West Virginia Democratic Senator Joe Manchin, whose opposition to “Build Back Better” — in part over deficit and inflation concerns — effectively rejected the social spending plan.

What to watch for this week:

  • Fed Chair Jerome Powell Speaks to Congress on Monetary Policy Wednesday and Thursday;
  • OPEC+ meeting, Wednesday;
  • Eurozone CPI, Wednesday;
  • Bank of Canada rate decision, Wednesday;
  • ECB publishes the minutes of its February meeting, Thursday;
  • USA: Payroll, Non-Farm Payrolls, Friday