Prices jump as Europe considers oil sanction against Russian

  • Saudi Arabia raises prices for customers across the globe, report says

Prices of crude oil jumped on Monday rising by as much as 4% after European countries voiced intention to dump Russian oil and Saudi Arabia raised prices for some of its biggest customers.

Brent crude futures were up 3.4% at $107.88 a barrel, having risen to a session high of $108.19, while West Texas Intermediate was up 4% at around $103.25 a barrel.

Oil prices soared to 14-year highs in March, as Russia’s invasion of Ukraine threw uncertainty around oil supply, as the country is the world’s second largest oil exporter. Surging cases of COVID in China, the world’s largest importer of energy, has dampened some of that bullishness, as investors have grown concerned about the potential impact to demand.

Saudi Aramco, the country’s state oil producer, will raise the selling price for its flagship Arab light crude for next month’s shipments to Asia to $9.35 a barrel over its benchmark, Bloomberg said. This represents a price hike of $4.40 a barrel from the previous month, which was already a record high.

Traders tend to view a price rise as a sign that a seller is not worried about a drop-off in demand.

Saudi Aramco’s price increase follows last week’s OPEC+ meeting at which the group decided to stick to its existing supply plan and resisted international pressure to raise output more quickly to help tame sky-high energy prices.

The US and UK are banning imports of Russian oil and gas, while the European Union has yet to make a decision on the matter as the importance of Russian energy to several member states holds the union back.

With lockdowns in place in various big Chinese cities to control the spread of COVID, fewer people than usual will be travelling over the Qingming festival this week, when millions of people take to the roads and the skies to visit relatives and friends. This could dent demand even further.

“The China holiday is definitely muting trading volumes in Asia today, leaving Brent crude unchanged at USD 104.50, and WTI unchanged at USD 99.35. With mainland China, Hong Kong and Taiwan all on holiday tomorrow, I expect the first part of the week in Asia to be quiet,” Oanda Senior Market Analyst Jeffrey Halley wrote.

According to Bloomberg, Aramco raised all other Asian grades by a minimum of $2.70 a barrel, while also raising its US Arab light selling price by $2.20 to a premium of $5.65 a barrel, which is also a record high. Since the country is the world’s biggest exporter of crude oil, it could set the tone for other exporters like Iraq and Kuwait to raise their own official selling prices.