Oil prices surge as US mulls Russian import ban

Crude prices closed in on all-time highs on Monday after the US confirmed it was considering curbing Russian oil imports.

Benchmark Brent crude initially surged almost 18% in early trading to more than $139 a barrel, its highest since 2008, before paring back gains.

By 1030 GMT, it was trading 8% higher at $125.95, while West Texas Intermediate was 8% stronger at $123.17.

Brent’s all-time high, reached in July 2008, is $147.50.

Gas prices also spiked, with European natural gas prices hitting a fresh all-time high of more than €240 per megawatt-hour on Monday.

Oil and gas prices have been climbing since Russia invaded Ukraine, but the latest spike was prompted by the US and Europe discussing a potential ban on Russian oil supplies.

US secretary of state Antony Blinken confirmed on Sunday that the US was in "very active discussions" with its European allies about banning Russian oil imports. House speaker Nancy Pelosi said Congress was also considering legislation that would ban the import of Russian oil.

She wrote: "The house is currently exploring strong legislation that will further isolate Russia from the global economy."

Richard Hunter, head of markets at Interactive Investor, said: "Suggestions that the Biden administration is considering an embargo of Russian oil supplies continued black gold’s stratospheric rise, with the oil price now having gained 66% in the year to date.

"The current backdrop is also stoking stagflation concerns, with rising inflationary pressure unlikely to be offset by sufficient global economic growth. This is in turn has led to one of the few positive possible outcomes from the conflict, that central banks may need to consider reining in their increasingly hawkish attitudes to interest rates."

Lee Hardman, currency analyst at MUFG, said: "The scale of the move higher in the oil price is now posing a serious downside risk for the global economy and will heighten fears that the negative spill-over from the Ukraine conflict could trigger a deeper global slowdown/recession.

"The US currently imports around 3% of its crude imports from Russia, which increases to about 8% when other petroleum products are included."

Hussein Sayed, chief market strategist at Exinity, said: "Sanctioning Russian oil would be the most significant escalation in the West’s response, and it poses serious negative consequences for the global economy. While Russia’s economy will be hurt the most, Europe will likely fall into a recession and US growth will be hit, with consumers feeling the most pain.

"In 2008, demand destruction occurred when prices approached $140. Adjusted for inflation, prices need to go above $200 to have a similar effect on consumption. However, the current spike in prices is not a demand-driven shock but a supply-drive one, and there’s no ceiling in sight.

"Russia currently exports around 4.5m barrels of crude. If exports were cut in half, prices would likely remain elevated in the short-to-medium term around current levels, even if the US and other nations release oil from their strategic reserves.

"However, if the crisis gets work and Europe imposes sanctions on Russian oil, with no response from Opec members, expect prices to jump above $200."

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: "European natural gas prices have exploded since the start of the year. If Russian exports are turned off, it will leave a huge gap in European energy needs, given the country accounts for more than 30% of the region’s natural gas imports."