After Russian troops bombed and seized Europe’s largest nuclear power station on Friday, oil prices rose in a volatile session on growing fears that global supplies will be disrupted.
Crude futures crossed the $115 mark on Wednesday, while Brent surpassed $118 on Thursday. Crude benchmark Brent surpassed $100 for the first time since 2014 last week, reaching $119.84 on Thursday.
This week, oil prices hit their highest levels in a decade, with WTI up 21% and Brent up 16% this week.
Outlook
A fire that engulfed the Zaporizhzhia power plant in Enerhodar, Ukraine, following an attack and capture by Russian forces caused Friday’s trading to be volatile.
- Initial reports of the mishap sent shivers through global markets, prompting traders to liquidate stocks and euro-denominated assets and load their portfolios with bonds, gold, and crude oil. As it became apparent that catastrophe had been averted, some gains were unwound.
- However, the overall market tone remains positive despite concerns about Western sanctions over the Ukraine conflict disrupting shipments from Russia, the world’s biggest crude and oil product exporter.
- Although the sanctions imposed by the United States and its allies do not specifically target Russia’s daily exports of 4-5 million barrels, they have severely limited the ability of the country to sell its crude, as customers are reluctant to become entangled.
- Wall Street’s traders and banks can keep buying and selling Russian oil and gas despite a raft of sanctions targeting Russia and its biggest lenders, the U.S. Treasury Department clarified Friday.
- As world leaders rally against Russian President Vladimir Putin’s unprovoked invasion of Ukraine, traders and banks are worried about running afoul of U.S. trade laws.
- Nevertheless, Treasury emphasized in a post that U.S. sanctions against Russia’s biggest banks – including VTB Bank – do not apply to energy transactions until June 24. Also exempt from the penalties are companies that move Russian energy commodities to the U.S., according to the department.
Generally, energy-related activities – such as purchasing, selling, or transporting Russian oil, gas, or other energy-related products – are permitted, Treasury said on its website. “Sanctions on the Russian Federation’s energy sector are not comprehensive.”
