Oil price

We'll send you a myFT Daily Digest email rounding up the latest Oil & Gas industry news every morning. The price of Brent oil soared to almost $140 a ...

The US and other countries are also negotiating a nuclear pact with Iran that could lift sanctions on Iranian crude oil exports. Shippers of Russian crude were last week forced to sell at steep discounts in an effort to secure buyers that are now concerned about counterparty risk and legal jeopardy. But uncertainty about the severity or range of new measures, amid a growing political clamour in the US for more punitive sanctions, has spooked global crude markets.

Analysts and industry professionals say that prices could soon break above $150 if the U.S. and EU will force an oil embargo upon Russia.

Scott Sheffield, chief executive at Pioneer Natural Resources, the biggest oil producer in the Permian, says U.S. producers will not be able to replace Russian oil this year. That's a massive 40 cents increase from the $3.604/gal average price a week earlier. With international oil prices soaring, U.S. gasoline prices hit the highest since 2008 at above $4 per gallon. An official ban from the West would mean much higher—potentially all-time high—oil prices. So, analysts are already predicting that $150, and even $200 oil, is coming. Oil surged to $130 a barrel at the start of trade on Monday, and now analysts and industry professionals say that prices could soon break above $150 and even soar to $200 a barrel as the U.S. and Europe are considering a ban on Russian oil.

China will be able to work around sanctions and other difficulties in buying Russian crude oil. Infrastructural development for oil and gas trading between ...

And just in case there were any doubts on where China stands – in practical terms – on Russia in light of its invasion of Ukraine, Beijing's foreign ministry spokesperson, Wang Wenbin, said in a press conference on 28 February: “China and Russia will continue to conduct normal trade cooperation in the spirit of mutual respect, equality and mutual benefit.” For good measure, over the weekend China warned the U.S. against any moves that “adds fuel to the flames” in Ukraine and its Foreign Minister, Wang Yi, called on the West to take account of Moscow's concerns about NATO expansion. At around the same time, China launched its now extremely successful Shanghai Futures Exchange with oil contracts denominated in yuan (the trading unit of the renminbi currency). Such a strategy was tested initially at scale in 2014 when Gazpromneft tried trading cargoes of crude oil in Chinese yuan and roubles with China and Europe. The second reason why Russia and China are untroubled that their oil and gas trade will be affected is that, in addition to the de facto exemptions so far granted to the aforementioned institutions, the U.S. issued on 24 February the ‘General License 8A’ waiver. China has long seen increased internationalisation of its renminbi currency as a fitting reflection of its growing status in the world and the chief executive officer of Russia’s Novatek, Leonid Mikhelson, said in September 2018 that Russia had been discussing switching way from US$-centric trading with its largest trading partners such as India and China, and that even Arab countries were thinking about it. A statement was released over the weekend that both are discussing a ban on Russian oil imports but this has not been approved yet and can still be worked around by China in the same way it did for Iran. In fact, despite several announcements last week of various types of sanctions being placed on a slew of Russian banks, one bank that was notably absent from all of the U.S.’s lists was Russia’s third biggest lender, Gazprombank, which serves Russian state gas giant (with huge oil interests as well) Gazprom. Indeed, Gazprombank and Russian state-owned banking giant, Sberbank, are also not on the list of the seven institutions that the E.U. wants banned from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) messaging and payments system. Washington learned early on – when it sanctioned Zhuhai Zhenrong Corp, the massive state-owned oil trading firm founded by the man who started oil trading between Beijing and Tehran in 1995 as a means by which Iran could pay for arms supplied by China to be used in the Iran-Iraq War - that Beijing would not be playing the sanctions game according to anyone’s rules but its own. One basic factor that has worked in China’s favour in circumventing sanctions on continuing to do business, especially oil and gas business, with Iran – and will equally apply to its doing the same with Russia – is the lack of exposure of China’s firms to the U.S. financial infrastructure – particularly to the U.S. dollar – and the ease with which companies can set up new special purpose vehicles to handle ring-fenced areas of their businesses to allow for special situations, such as sanctions. Most of the bank’s settlements during that time were in Euros and Chinese renminbi and in 2012 it was sanctioned by the U.S. Treasury for conducting business with Iran. Rather like Iran – whose Foreign Minister, Mohammad Zarif, infamously stated back in December 2018 at the Doha Forum, that: ‘If there is an art that we have perfected in Iran, [that] we can teach to others for a price, it is the art of evading sanctions’ – China has always regarded any U.S. sanctions as a fun puzzle to solve. As a corollary of this operational independence, China made no secret at the time of the pre-2016 sanctions against Iran or the post-2018 sanctions against it that it was going to use its Bank of Kunlun as the main funding and clearing vehicle for its dealings with Iran. The Bank of Kunlun has considerable operational experience in this regard, as it was used to settle tens of billions of dollars’ worth of oil imports during the U.N. sanctions against Tehran between 2012 and 2015. China has proven with Iran that it has much practice and great skill in working around sanctions, and the U.S. has made it even easier to do so in the case of Russia in several ways, including leaving gaping loopholes in its sanctions that China and Russia can exploit. In the case of Russian oil and gas exports, though, there is no need for China to go through all the trouble it took to circumvent the sanctions on Iran, for three key reasons. The current ambiguity surrounding these mechanisms suits China perfectly, as until it believes that it is militarily, technologically, and economically able to directly challenge the U.S. as the world’s number one superpower its strategy will remain to gradually build up its economic power through the multi-generational power-grab project, ‘One Belt One Road’ (OBOR), as analysed in depth in in my new book on the global oil markets.

Beijing is betting that its large domestic energy supplies, close ties with Russia and low consumer inflation will insulate it from surging crude prices. But, with oil costs now 40% higher than they were two weeks ago, Chinese businesses are facing a ...

Grain and pork prices have also been trending lower, which would help to keep consumer inflation below the government’s target of 3%, he said. Producer inflation has also eased in recent months after surging last year on the back of soaring costs for metals and coal. China imports about 15% of its oil from Russia and may be able to pay lower prices for those imports due to reduced demand from the U.S. and Europe, she added. China is the world’s biggest oil importer, purchasing more than $257 billion worth of crude last year, according to official statistics. The dilemma for policy makers is that the threat of inflation may make central bank easing more challenging. Beijing is betting that its large domestic energy supplies, close ties with Russia and low consumer inflation will insulate it from surging crude prices.