Oil prices are bullish during the Asian session on Tuesday as the two major oil benchmarks are up over 1%, fueled by the potential for more sanctions following alleged war crimes by Russian troops in Ukraine. This has also added to concerns about supply disruptions, while Iran’s nuclear talks stalled.
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The global benchmark, the Brent crude futures is up 1.62%, currently trading $109.27 a barrel, the United States benchmark, the West Texas Intermediate futures is also up 1.62%, currently trading $104.97 a barrel, as of the time of this writing.
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Also weighing in on the price of the black liquid is the comment of the Japanese industry minister Koichi Hagiuda, who stated that the International Energy Agency (IEA) was still working out details for a planned second round of a coordinated oil releases
What you should know
The oil benchmarks are having a bullish week as they both posted gains of more than 3% on Monday, as the threat of more sanctions on Russia became the focus.
There has been an increase in civilian deaths in Ukraine by Russian troops which has sparked the talks and possibility of more sanctions to the warring Russia.
German Chancellor Olaf Scholz said Russian President Vladimir Putin and his supporters would “feel the consequences” of events in Bucha, outside the capital Kyiv, where a mass grave and tied bodies shot at close range were found.
The chancellor further stated that western allies are expected to agree on further sanctions against Moscow in coming days, though the timing and reach of the new package was not clear.
France’s President Emmanuel Macron suggested sanctions on oil and coal, adding there were very “clear clues pointing to war crimes” by Russian forces.
Also weighing on the price is the stalemate seen in Vienna, concerning the talks to revive the Iran nuclear deal, which could put more Iranian barrels into the market. Iran has gone on blamed the United States for halting the talks.
On Monday, consultancy firm, Wood Mackenzie, estimated EU members and advanced economies including Japan and South Korea could “swap” some 650,000 barrels per day of Russian crude oil with similar grades and volumes. These would primarily come from Middle East volumes that are normally purchased by China and India.
According to Bloomberg’s energy and commodities columnist, Javier Blas, Russian oil are being sold at a massive discount in the market. In a tweet, he stated, “Litasco, the trading arm of Lukoil, offers a cargo of Russian Urals crude at a record discount of $31.35 a barrel, under benchmark dated Brent.”
India’s state-run Mangalore Refinery and Petrochemicals Ltd. purchased 1 million barrels of Russian Urals for May loading, in a rare move driven by the steep discount offered.
According to India’s finance minister, Nirmala Sitharaman, she explains that she will put her country’s interest first and will take advantage of the current discount offered for Russian oil. She stated, “I would put my country’s interest first, I would put my energy security first. If the fuel is available at a discount, why shouldn’t I buy it?”
Alex Sun, a managing consultancy for Wood Mackenzie stated, “Global crude oil trade will rebalance by ‘crude swapping’ between ‘self-sanctioning’ advanced economies and developing markets.” He also noted that a steep discount for Russian Urals barrels has created a buying opportunity for China to fill declining strategic reserves.