Spare crude-export capacity will limit any gains in oil prices after the US and European Union imposed sanctions on Russian energy companies over Ukraine, according to Nomura Holdings Inc. and Sapient Global Markets.
OAO Rosneft, Russia’s biggest oil company, natural gas producer OAO Novatek and OAO Gazprombank, the third-largest lender, are among those hit by the penalties, the US Treasury Department said yesterday. The sanctions are the latest response to what US and European leaders say is Russian President Vladimir Putin’s refusal to end support for rebels who have been battling Ukrainian government forces in the east.
Brent crude rose 2% to $111.20 a barrel on March 3 after Ukraine mobilised its army reserves as Russia seized control of the Black Sea region of Crimea. The Organisation of Petroleum Exporting Countries, which last month pledged to replace any barrels lost during the conflict in Iraq, may cover any potential cut in supply from Russia, according to Nomura.
“OPEC will step up and export more to replace the lost Russian crude and calm these oil-price spikes,” Gordon Kwan, the regional head of oil and gas research at Nomura Holdings Inc. in Hong Kong, said today. “The US and EU are smart enough not to risk derailing the global economic recovery by choking off Russia’s oil exports.”
Brent for September settlement was at $107.22 a barrel, up 5 cents, on the London-based ICE Futures Europe exchange at 3:22 p.m. Sydney time. The European benchmark crude traded at a premium of $6.39 to West Texas Intermediate in New York for the same month.
OPEC’s spare capacity is estimated at 3.25 million barrels a day, the International Energy Agency said in its monthly report on July 11. Saudi Arabia, the group’s biggest producer, pumped 9.9 million barrels a day of oil in June, according to data compiled by Bloomberg. The kingdom is capable of producing as much as 12.5 million.
Russia exported about 6.14 million barrels a day of crude in May, said the Paris-based agency, an adviser to developed nations. Commercial oil inventories held by members of the Organisation for Economic Cooperation and Development rose by 44.2 million barrels in May to 2.639 billion, its report shows.
The EU said it would halt lending for new public-sector projects in Russia by the European Investment Bank, the bloc’s in-house lender, and will use its influence to stop new lending by the European Bank for Reconstruction and Development. The US and EU are seeking to squeeze the nation’s $2trillion economy by limiting access to financing.
At a news conference in Brasilia, Putin called the US sanctions “aggressive policy” and will only end up hurting American companies. The sanctions will lead US-Russia relations to a dead end, he said.
“People will be waiting to see what Putin does,” Chip Register, the New York-based managing director of Sapient Global Markets, a financial and commodity market consultant, said by phone from London yesterday. “The oil markets, there’s spare capacity in the world, so it’ll be a little harder to move them around.”
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