Market Wire - Oil Prices Surge as US Prepares to Unilaterally Ban Russian Imports
Karl Schamotta - Chief Market Strategist, firstname.lastname@example.org
A number of national media sources are reporting the United States is preparing to place an embargo on imports of Russian oil, coal, and natural gas imports. According to anonymous Biden administration officials quoted by CNN and the New York Times this morning, an announcement will come later today.
European nations, more dependent on Russian supplies, and more exposed to a sharp rise in household expenditures, have signalled an unwillingness to join the action.
West Texas Intermediate prices are up, gaining $2 to trade near $124 a barrel, while the Brent benchmark has smashed through the $130 mark. Safe haven demand is rising in currency markets, with the yen and dollar climbing against their major counterparts - including against the historically oil-linked Canadian dollar.
The United States has once again become the world’s biggest oil producer, but massive levels of domestic consumption intersect with logistical realities and Jones Act restrictions to mean that the country continues to import millions of a barrels a day. Shipments from Russia made up roughly 7.9 percent of monthly crude oil and petroleum product imports last year, but have plunged in recent months, and are no longer material contributors to the country’s overall energy mix. Coal and natural gas purchases from Russia also make up a negligible share of total consumption.
The measure could trigger a squeeze in consumer spending - particularly as politically-motivated observers emphasize the negative effects - but energy has fallen as a share of US household consumption since the seventies, and the impact on outlays should be proportionally smaller.