Oil prices jumped on Monday, as President Vladimir Putin’s order to put his country’s nuclear forces on high alert overshadowed hopes for negotiations between Russia and Ukraine.
The Announcement from President Volodymyr Zelensky That a Ukrainian delegation would meet with a Russian delegation near the Ukraine-Belarus border for talks “without preconditions” was viewed with skepticism by oil traders, most political analysts and Western officials.
And traders have not raised prices in recent days because Western sanctions against Russia have so far not hampered the export of oil and natural gas to Western Europe. But benchmark Brent crude rose more than 3 percent on Monday to over $101 a barrel, while the U.S. West Texas Intermediate rose to around $95 a barrel.
US gasoline prices have risen by about a penny per gallon each day over the past week, according to surveys by the AAA Automobile Club. at $3.61 per gallon For regular gasoline, the national average is about $1 higher than it was a year ago.
The risks of higher energy prices remain high as the Russians continue their invasion of Ukraine. In the early days, the Russian offensive faltered in the face of stiff resistance from the Ukrainian armed forces and Ukrainian citizens.
Bombing and missiles could destroy vital pipelines running through Ukraine, although that hasn’t happened yet. Some Republican leaders and members of Congress from both parties are pushing for tougher penalties on energy transactions. Western oil companies may decide that doing business with Russia is not worth the risk, especially if Western oil technology and services are either subject to sanctions or because financial sanctions will impede Russian payments.
“Perhaps the greatest uncertainty is the Russian response,” according to a report from RBC Capital Markets on Sunday. “Central Bank sanctions will sharply limit Russia’s access to the foreign exchange reserve war fund and the proceeds from oil sales in offshore accounts.”
The West’s hard-line economic stance against Russia is already having an effect. BP said on Sunday it would do so “Exit” from its 20 percent stake in Rosneft, which is the Russian giant, and that it will remove two of its representatives from the Rosneft board of directors. This marked the heyday of the British-based company’s retreat after three decades of doing business in Russia.
Ukraine’s gas pipeline operators said on Sunday that transit of natural gas passing through the country to most parts of Europe is normal.
Another key issue is Russia’s position at Wednesday’s meeting of OPEC Plus, in which Saudi Arabia and other major producers are participating. The group is meeting to discuss how much to increase production levels to mitigate rising global prices. Washington has so far had little success in pressuring the group to increase production.
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