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Highlights
- Crude oil prices surged more than US$7/bbl on Monday.
- the Russian President Vladimir Putin put the country’s nuclear deterrent on high alert.
- Western allies and Japan have decided to block certain Russian banks from the SWIFT international payment system, blocking the smooth international trade flow.
Crude oil prices surged more than US$7/bbl on Monday after Russian President Vladimir Putin put the country's nuclear deterrent on high alert. The significant decision came as the Western nations and Japan imposed sanctions on Russian banks.
Must Read: Crude oil rises on fresh Russia-Ukraine war warnings
The nuclear alert coupled with the planning of sanctions on Russia created fears among traders that Russian oil supplies might get affected as the tension between Russia and Ukraine intensifies.
The prices of Brent Crude oil hit the mark of US$105 on Thursday after Russia officially announced to invade Ukraine, exacerbating concerns about disruptions to the global energy supply.
May delivery Brent Crude oil futures last traded at US$98.75 per barrel up 4.49%, whereas April delivery WTI crude oil futures traded 5.23% up at US$96.38 per barrel as of 28 February 2022 at 12:49 PM AEDT.
Must Read: Crude oil hits fresh seven-year high amid Russia-Ukraine tension
Sanctions on Russia
The ongoing crisis between Russia and Ukraine has prompted instability in the energy market as Russia is one of the largest producers of crude oil and natural gas in the world.
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The Western sanctions on Russia are expected to create chaos in the global energy market and may push oil prices to much higher levels.
The US and EU had already imposed an initial phase of sanctions on Russia in the last week and a fresh decision by Western allies on Saturday to block certain banks from the SWIFT payments system has further boosted the oil prices. SWIFT is a secure messaging system that facilitates rapid cross-border payments, making a smooth international trade flow.
Good Read: How a Russian invasion of Ukraine might impact crude oil prices
The export of almost all commodities exported from Russia ranging from oil and gas to metals are likely to be severely affected by the new sanctions.
In addition to this, Japan on Sunday also affirmed to block certain Russian banks from the SWIFT payment system.
Meanwhile, the US and Iran have been engaged in indirect talks in Vienna that could lead to the removal of sanctions on Iranian oil. Iranian oil flows could help the market to get an uninterrupted supply of 1Mbpd of oil, enough to cool the boiling oil prices.
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 block certain Russian banks from the SWIFT international payment system, blocking the smooth international trade flow. The fresh sanctions are likely to hit Russia's O&G and metals exports badly.
