The prices of oil surpassed $110 for the first time in more than seven years on Wednesday (today) amid increasing supply chain disruptions and countries seeking alternative oil merchants in an already tight market.
At the time of press, Brent crude hit $112.06 per barrel after going up by $7.09 in afternoon Asia trade — the highest since September 2014, and was at $110.23 a barrel at 0420 GMT, up by $5.30. Consequently, the US Western Texas Intermediate (WTI) crude futures rose by $7.21 to $110.62 a barrel.
Also, natural gas prices expanded by another further 2.54 percent, while spot gold, which is traditionally seen as a safe-haven asset, was last seen at $1,941.4 after it depreciated by 0.2 percent earlier today.
Global markets continue to rally in thin as the daily wrapup approaches its closing stages and nervous sentiments make headwinds. Among the major oil and gas firms, BP and Shell PLC have declared plans to abandon Russian businesses and joint ventures, and TotalEnergies SA (TTEF.PA) has announced that it will not invest any more in its Russian activities.
Subsequent to Moscow’s invasion of Ukraine, Exxon Mobil — one of the world’s largest publicly traded oil and gas companies — said on Tuesday that it will abandon Russia’s oil and gas activities. Reuters reported that the corporation will no longer manage big production facilities on Sakhalin Island in Russia’s Far East subsequent to the decision.
Traders in New York and the Gulf of Mexico are avoiding Russian crude despite the fact that Western governments have not put direct bans on energy shipments. Meanwhile, Bharat Petroleum Corp (BPCL.NS) — a state-run Indian refiner — is seeking additional oil from Middle Eastern suppliers for April, anticipating that more Western sanctions on Russia may disrupt crude deliveries.
Trade sources revealed that Saudi Arabia, which is the world’s top supplier of oil, is expected to raise crude prices significantly for Asia in April, with differentials for most grades reaching all-time highs as global supplies tighten due to sanctions on Russia’s funding and shipping.
On the flip side, the International Energy Agency decided on Tuesday to release 60 million barrels of oil in a synchronized release but analysts said that this will only bring short relief on the supply front.
If Russia’s stance towards Ukraine persists, the US administration threatens to restrict Russian oil exports. Various reports suggest the United States is pushing for an outright ban on Russian crude, but shutting off that supply might drive up fuel costs in the US, while Russia could easily opt to sell surplus oil to China and other countries.
Russia exports four to five million barrels of oil a day and two to three million barrels per day of refined products to foreign markets, making it one of the world’s top petroleum exporters. Last week, the country invaded Ukraine, resulting in international sanctions and widespread condemnation in an operation that Moscow referred to as a “special operation”.
Impact At Home
While global trends paint a rough picture for near-term projections, the situation is quite similar at home. Discussing local trends, the Federal Minister for Finance and Revenue, Shaukat Tarin, tweeted that in FY22, the government lost an average of Rs. 70 billion every month and Rs. 840 billion for the entire year as a result of shifts in global oil prices. “Following the 166% increase in international petroleum prices since November 2020, the Govt is continuously losing its revenue from Sales tax & levy, just to protect common people from higher prices,” he said.
https://twitter.com/shaukat_tarin/status/1494288627555311621
“Not in the history of Pakistan any political Govt has provided even 1/3rd of this relief in [a] single year. Even now Prime Minister is keenly exploring the options with me, as [to] how to offset the higher prices despite [the] recent increase in salaries, and relief through Ehsaas Raashan,” he added.
