Crude oil settles higher on rising supply concerns

Highlights

• Crude oil prices rose on Monday.
• Russia is facing severe disruptions to its exports after Western allies imposed stiff sanctions on Moscow.
• Russia could retaliate against these harsh measures by suspending European energy supplies.

Crude oil prices climbed up on Monday after the Western nations and Japan imposed more sanctions on Russia, blocking several Russian banks from a global payment system that could cause disruptions to its oil exports.

Must Read: Crude oil rises on fresh Russia-Ukraine war warnings

The country is facing intense challenges in its exports of almost every commodity ranging from crude oil to grains after Western nations block some Russian banks from the SWIFTS international payment system, a secure messaging system that facilitates rapid cross-border payments, making a smooth international trade flow.

In response to the new sanctions, Russia has put its nuclear deterrent on high alert. The nuclear alert coupled with the new sanctions on Russia has created supply concerns among traders.

The prices of Brent Crude oil hit the mark of US$105.07 during the early trading session on Monday. Earlier, the prices reached such high levels on Thursday after Russia officially announced to invade Ukraine.

May delivery Brent Crude oil futures last traded at US$98.88 per barrel up 0.82%, whereas April delivery WTI crude oil futures traded 0.90% up at US$96.58 per barrel as of 01 March 2022 at 12:27 PM AEDT.

Must Read: Crude oil hits fresh seven-year high amid Russia-Ukraine tension

Disruptions to Russian exports

Russia is facing severe disruptions to its exports of all commodities ranging from oil to grains after Western allies imposed stiff sanctions on Moscow and cut several banks from the SWIFT payment system. Russian crude oil which accounts for nearly 10% of the global supply was hit hard in the physical market.

Good Read: How a Russian invasion of Ukraine might impact crude oil prices

Russia could retaliate against these harsh measures by suspending European energy supplies. Russian forces also seized two small cities in the south-eastern part of Ukraine.

In addition to that, various oil companies including BP and Shell plans to make an exit from Russia, as a part of the West's campaign to isolate Russia's economy.

The ongoing tension between both nations has ignited instability in the global energy market as Russia is the world's third-largest producer of crude oil in the world.

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The Western sanctions on Russia are expected to disrupt global supplies creating a market deficit, pushing the prices of most of the commodities to much higher levels.

Also Read: WTI Crude surpasses US$90/bbl as frigid weather cascades across the US

Bottom Line

Crude oil prices surged significantly on Monday after the Western allies and Japan decided to impose sanctions on Russian banks from a global payment system, causing disruptions to its smooth trade flow.