There is no end to the rise in energy prices. The war between Russia and Ukraine has already made oil and gas considerably more expensive, but the ceiling is not yet in sight. The West is considering turning off the Russian oil tap itself, although that could be an expensive sanction. Meanwhile, the gas price anticipates the possible event that Russia cuts gas supplies to Europe.
The price of one barrel of Brent oil has taken another hurdle, crossing the $7 per barrel mark on Monday, March 120. This means that the price is now at the highest level since 2008. The United States is considering no longer importing Russian oil. When this sanction is implemented, a key supply area will dry up and the markets are now anticipating this. Russia is by far the largest oil supplier in Europe, about 40% of the supply comes from there.
$150 a barrel?
Oil prices are likely to explode if Russian oil is banned by the West. An AvaTrade analyst calls a price of $150 a barrel a modest scenario. Other analysts endorse this. There is also price-depressing news in the background. The United States appears to be negotiating a nuclear deal with Iran. Negotiations have started under President Joe Biden and a short-term deal is not ruled out.
When both countries reach an agreement, the Western import boycott for oil from Iran is likely to expire. However, Iranian volumes do not outweigh Russian export volumes and therefore cannot reverse the bullish sentiment.
Gas price explodes
The gas price continues to anticipate disrupted supplies from Russia and set another record today. The natural gas quotation on the TTF was still below the €200 limit at the end of last week, but has now risen to almost €335 per megawatt hour. The unprecedented price increase of about 70% in one trading day is due to fears that the Kremlin may cut gas supplies to Europe if the West decides to ban Russian oil. In that case, Russia also shoots itself in the foot, because then its income quickly dries up.