Oil prices soar 6% on Saudi, Russian supply fears

Oil prices jumped by more than $6 on Monday as a weekend attack on Saudi facilities and EU discussions on banning Russian crude raised concerns over global supplies.

Brent North Sea crude surged 6.52 per cent to $114.55 per barrel and WTI jumped 5.5 per cent to $110.60 as the EU debates a ban Russian crude imports.

Top producer Saudi Arabia warned that Yemeni rebel attacks on the kingdom’s oil facilities pose a ‘direct threat’ to crude supplies and it would not bear responsibility for any global oil supply shortages in light of the Houthi attacks.

“Such attacks result in serious consequences for upstream and downstream sectors affecting the kingdom’s production capacity and its ability to fulfil its obligations,” state news agency SPA quoted a Saudi foreign ministry official.

$300 per barrel price

In another development, Russian Deputy Prime Minister Alexander Novak said on Monday oil prices could reach $300 a barrel if Russian crude was shunned by the West but he said such a scenario was unlikely.

“For now it’s impossible” for Europe to reject Russian hydrocarbons. We will see how it goes in the future,” TASS news agency quoted Novak as having said.

Oil prices moved higher ahead of talks this week between European Union governments and US President Joe Biden in a series of summits that aims to harden the West’s response to Moscow over its attack on Ukraine. EU governments will consider whether to impose an oil embargo on Russia.

“With the possibility that more than a million barrels of Russian oil a day will be snubbed, given that the Netherlands and Germany combined received around a quarter of Russia’s crude and light oil exports, demand would shoot up for crude supplies from Opec+ nations,” Susannah Streeter, senior markets analyst at UK-based asset manager Hargreaves Lansdown, said.

Cutting reliance on Russian energy

German Economy Minister Robert Habeck, who is on a trip to the Gulf states to discuss long-term energy supplies, also spoke with the UAE oil firm Adnoc about increasing oil production.

“We haven’t talked about oil except Opec. In this respect, the appeal that the production volume be increased in such a way that the people of the world can pay for this oil as long as we need it,” Habeck told journalists after a meeting with the company.

Germany makes efforts to reduce its reliance on Russian energy and increase pressure on President Vladimir Putin over the country’s attack on Ukraine. Last week, the British prime minister Boris Johnson the UAE and Saudi Arabia to try to persuade the Opec members to step up oil production and help lower energy prices.

The latest report from the Organisation of the Petroleum Exporting Countries and allies including Russia, together known as Opec+, showed some producers are still falling short of their agreed supply quotas. However, Russia had increased its oil and gas condensate output to 11.11 million barrels per day (bpd) between March 1 and March 20, from an average output of 11.06bpd recorded in February, according to Reuters.

“Oil prices are up noticeably as the new week of trading begins,” noted Commerzbank analyst Carsten Fritsch even prior to the Saudi comments.

“The reason for the upswing is news that the EU appears to be considering a ban on oil imports from Russia.”

— muzaffarrizvi@khaleejtimes.com