Opinion

Brent prices break $130 as US bans Russian crude imports over Ukraine invasion

President Joe Biden announced a ban on US imports of Russian oil on Tuesday, in the administration’s most far-reaching action yet to punish Moscow for invading Ukraine. (Shutterstock)
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Updated 09 March 2022

Brent prices break $130 as US bans Russian crude imports over Ukraine invasion

  • The ban came with Democrats threatening legislation to force Biden’s hand
  • Britain also said on Tuesday it would phase out Russian oil imports by the end of this year

RIYADH: Benchmark Brent crude futures for May above $130 a barrel as US decides to ban Russian oil imports. US West Texas Intermediate, or WTI, crude futures for April delivery traded around $126 a barrel.

President Joe Biden announced a ban on US imports of Russian oil on Tuesday, in the administration’s most far-reaching action yet to punish Moscow for invading Ukraine.

“We’re banning all imports of Russian oil and gas and energy. That means Russian oil will no longer be acceptable at US ports and the American people will deal another powerful blow to (President Vladimir) Putin,” Biden said in an address from the White House, adding that the decision was taken “in close consultation” with allies.

The ban came with Democrats threatening legislation to force Biden’s hand, despite the likely impact on already soaring gas prices.

UK to phase out Russian oil imports

Britain also said on Tuesday it would phase out Russian oil imports by the end of this year, in line with new sanctions announced by the US following the invasion of Ukraine.

“This transition will give the market, businesses and supply chains more than enough time to replace Russian imports — which make up 8 percent of UK demand,” Business Secretary Kwasi Kwarteng tweeted.

The oil sanction does not apply to Russian natural gas, which accounts for some four percent of UK supply. But Kwarteng said he was “exploring options to end this altogether.”

The announcement came in coordination with an embargo on Russian oil announced by US President Joe Biden.

Oil 

The rise in oil prices has prompted the US to open a dialogue with the Venezuelan president on energy matters. 

The White House said on Monday that a US delegation held weekend talks in Venezuela with the government of President Nicolas Maduro that included a discussion of energy supplies — as Washington looks for ways to reduce its imports of Russian oil.

The surprise move comes at a time when analysts at Bank of America said that if most of Russia’s oil exports were cut off, there could be a shortfall of at least 5 million barrels per day, pushing prices as high as $200.

JP Morgan analysts said oil could soar to $185 this year, while analysts at Mitsubishi UFJ said oil may rise to $180 and cause a global recession.

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Oil prices see-sawed near 14-year highs on Tuesday as the United States considered acting alone to ban Russian oil imports rather than teaming up with allies in Europe, easing concerns of a wider disruption to crude supplies.

Brent crude futures on Tuesday are trading around $125, while US benchmark WTI is near $121.

US-Venezuela talks

Maduro, with whose regime the United States broke off relations in 2019, has been among the few international figures to assure Russian President Vladimir Putin of his “strong support” in the wake of the invasion.

“As it relates to Venezuela, the purpose of the trip that was taken by administration officials was to discuss a range of issues including certainly energy, energy security,” White House Press Secretary Jen Psaki told reporters.

Venezuela’s opposition also said it had met with the high-level US delegation, whose trip to Caracas — reported by multiple US media — came as Washington seeks to isolate Russia over its invasion of Ukraine.

Maduro confirmed the meeting in a televised appearance late Monday, describing it as “respectful, cordial and diplomatic” without going into detail about the issues addressed.

“We did it in the presidential office,” he said. “We had almost two hours talking.”

“It seemed very important to me to be able, face to face, to discuss topics of maximum interest to Venezuela,” he continued.

Iran nuclear deal

Meanwhile, talks to revive Iran’s 2015 nuclear deal with world powers were mired in uncertainty after Russia demanded a US guarantee that sanctions it faces over the Ukraine conflict would not hurt its trade with Tehran.

Iran’s Foreign Minister Hossein Amirabdollahian said Tehran would not allow “any foreign elements to undermine its national interests,” and the Foreign Ministry said it awaited an explanation from Russia.

France told Russia not to resort to blackmail over efforts to revive the nuclear deal, and Iran’s top security official said the outlook for the talks “remains unclear.”
Iran would take several months to restore oil flows even if it reached a nuclear deal, analysts said.

Shell

Shell on Tuesday apologized for buying Russian crude oil last week and said it would withdraw completely from any involvement in Russian hydrocarbons over the country’s invasion of Ukraine.

“We are acutely aware that our decision last week to purchase a cargo of Russian crude oil ... was not the right one and we are sorry,” Shell CEO Ben van Beurden said.

Shell bought a cargo of Russian crude oil from Swiss trader Trafigura in S&P Global Platts window loading from Baltic ports at a record low of dated Brent minus $28.50 a barrel, traders said on Friday.

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Pakistan’s central bank chief announces early repayment of $1 billion bond

Updated 25 November 2022

Pakistan’s central bank chief announces early repayment of $1 billion bond

  • There has been growing uncertainty about the ability of Pakistan to meet external financing obligations
  • The bank chief says funding has been lined up from multilateral and bilateral sources amid depleting reserves

ISLAMABAD: Pakistan will repay a $1 billion international bond on Dec. 2, three days before its due date, the governor of Pakistan’s central bank told a briefing on Friday.
There has been growing uncertainty about the ability of Pakistan to meet external financing obligations with the country in the midst of an economic crisis and recovering from devastating floods that killed over 1,700 people.
The bond repayment, which matures on Dec. 5, totals $1.08 billion, Jameel Ahmad, Governor State Bank of Pakistan, told a briefing, according to two analysts who were present.
Ahmad added that funding has been lined up from multilateral and bilateral sources to ensure the repayment would not affect foreign exchange reserves. An immediate inflow of $500 million was expected next week on Tuesday from the Asian Infrastructure Investment Bank, he said.
Pakistan’s reserves with the central bank stood at $7.8 billion as of Nov. 18, barely enough to cover a month’s imports.
Ahmad said reserve levels will depend on the continued realization of expected inflows and rollover of loans from friendly countries, but added he was confident the reserve figure will be “much higher” by the end of the financial year in June 2023.
He told the briefing he expects external financing requirements would be met on time because of inflows from international lenders. He pointed out that, despite payments of $1.8 billion in November, reserves remained stable.
The International Monetary Fund (IMF) said earlier this week that Pakistan’s timely finalization of a recovery plan from devastating floods is essential to support discussions and continued financial support from multilateral and bilateral partners.
Pakistan is currently in an IMF bailout program, which it entered in 2019, but a firm date for the ninth review to release much-needed funds is pending even as it battles a full-blown economic crisis, with decades-high inflation and low reserves.
The central bank raised its key policy rate by 100 basis points to 16% on Friday in an unexpected move to ensure high inflation does not get entrenched.


Strong inflationary pressure pushes Pakistan to raise key interest rate to 16 percent

Updated 25 November 2022

Strong inflationary pressure pushes Pakistan to raise key interest rate to 16 percent

  • The central bank raised the policy rate by 100 basis points while blaming inflation on global and local supply shocks
  • The bank projected the average inflation during the current fiscal year to remain over 21 percent due to food prices

KARACHI: Pakistan’s central bank decided to jack up key policy rate by 100 basis points to 16 percent on Friday, citing inflationary pressure in the economy which, it said, had not toned down yet.
The State Bank of Pakistan (SBP) previously increased the interest rate by 1.25 percent to 15 percent in July this year. So far, it has raised the key rate by 625 basis points, including the latest increase, since the outset of the year.
“At today’s meeting, the Monetary Policy Committee (MPC) decided to raise the policy rate by 100 basis points to 16 percent,” said a statement released by the central bank. “The decision reflects the MPC’s view that inflationary pressures have proven to be stronger and more persistent than expected.”
The SBP said it had taken the decision to ensure that elevated inflation should not get entrenched and begin to risk financial stability, adding that it wanted to pave the way for higher growth on a more sustainable basis.
The bank said inflation was increasingly driven by persistent global and domestic supply shocks that were also raising costs amid the ongoing economic slowdown.
“In turn, these shocks are spilling over into broader prices and wages, which could de-anchor inflation expectations and undermine medium-term growth,” it added.
The bank continued the rise in cost-push inflation could not be overlooked and necessitated a monetary policy response.
The MPC noted the short-term costs of bringing inflation down were lower than the long-term costs of allowing it to fester.
It also called for curbing food inflation through administrative measures to resolve any supply-chain bottlenecks.
The country’s inflation rate has hovered around historically high levels in Pakistan in recent months and was recorded at 26.6 percent in October. The central bank now expects the average inflation to go up to 21-23 percent during the current fiscal year (FY23) due to higher food prices and core inflation.
Pakistan has also witnessed an economic slowdown in the wake of the recent floods that have damaged huge infrastructure and agriculture output.
“After incorporating Post-Disaster Needs Assessment of the floods and latest developments, the FY23 projections for growth of around 2 percent and a current account deficit of around 3 percent of GDP shared in the last monetary policy statement are re-affirmed,” the SBP added.
It maintained that higher imports of cotton and lower exports of rice and textiles in the aftermath of the floods should be broadly offset by a continued moderation in the overall imports due to the economic slowdown and softer global commodity prices.
The central bank acknowledged that the recent climate catastrophe could make it challenging to achieve the aggressive fiscal consolidation budgeted for the year, though it noted that it was important to minimize slippages by meeting additional spending needs through expenditure reallocation and foreign grants.
The bank also emphasized the need to maintain fiscal discipline to complement monetary tightening, saying the two things could help prevent an entrenchment of inflation and lower external vulnerabilities.
 


Saudi, Iraqi energy ministers stress need to work within OPEC+ framework — statement

Updated 25 November 2022

Saudi, Iraqi energy ministers stress need to work within OPEC+ framework — statement

  • The minister arrived in the Saudi capital Riyadh earlier on Thursday

The energy ministers of Saudi Arabia and Iraq stressed the importance of working within the OPEC+ framework and said they will take further measures to ensure the stability of oil market if necessary, according to a joint statement released by the Saudi Energy ministry on Thursday.
The Saudi Energy minister, Prince Abdulaziz bin Salman, and his Iraqi counterpart, Hayan Abdel-Ghani, met to ensure their commitment to the OPEC+ decision, the statement said.
The Iraqi minister had arrived in the Saudi capital Riyadh earlier on Thursday following an invitation from Saudi Arabia, the Iraqi oil ministry said.


EU split on Russian oil price cap level, talks to resume Thursday

Updated 24 November 2022

EU split on Russian oil price cap level, talks to resume Thursday

  • The G7, including the United States, as well as the whole of the European Union and Australia, are slated to implement the price cap on sea-borne exports of Russian oil on Dec. 5

BRUSSELS: EU governments failed to reach a deal on Wednesday at what level to cap prices for Russian sea-borne oil under the Group of Seven nations scheme and will resume talks on Thursday evening or on Friday, EU diplomats said.

Earlier on Thursday representatives of the EU’s 27 governments met in Brussels to discuss a G7 proposal to set the price cap in the range of $65-$70 per barrel, but the level proved too low for some and too high for others.

“There are still differences on the price cap level. We need to proceed bilaterally,” one EU diplomat said. “The next meeting of ambassadors of EU countries will be either tomorrow evening or on Friday,” the diplomat said.

The G7, including the US, as well as the whole of the EU and Australia, are slated to implement the price cap on sea-borne exports of Russian oil on Dec. 5.

The move is part of sanctions intended to slash Moscow’s revenue from its oil exports so it has less money to finance its invasion of Ukraine.

But the level of the price cap level is a contentious issue — Poland, Lithuania and Estonia believe the $65-$70 per barrel would leave Russia with too high a profit, since production costs are around $20 per barrel.

Cyprus, Greece and Malta — countries with big shipping industries that stand to lose the most if Russian oil cargos are obstructed — think the cap is too low and demand compensation for the loss of business or more time to adjust.

“Poland say they can’t go above $30 per barrel. Cyprus wants compensation. Greece wants more time. It is not going to happen tonight,” a second diplomat said.

Some 70 percent to 85 percent of Russia’s crude exports are carried by tankers rather than pipelines.

The idea of the price cap is to prohibit shipping, insurance and re-insurance companies from handling cargos of Russian crude around the globe, unless it is sold for no more than the price set by the G7 and its allies.

Because the world’s key shipping and insurance firms are based in G7 countries, the price cap would make it very difficult for Moscow to sell its oil — its biggest export item accounting for some 10 percent of world supply — for a higher price.

At the same time, because production costs are estimated at around $20 per barrel, the cap would still make it profitable for Russia to sell its oil and in this way prevent a supply shortage on the global market.

Russian Urals crude oil already trades within the discussed range at around $68 per barrel.

EU diplomats said most EU countries, with G7 members France and Germany taking the lead, were supportive of the price cap, worried only about the ability to enforce it.

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Countries adopt COP27 deal with ‘loss and damage’ fund

Updated 20 November 2022

Countries adopt COP27 deal with ‘loss and damage’ fund

  • Calls by developing countries for such a fund have dominated the two-week summit
  • Summit has been seen as a test of global resolve to fight climate change

SHARM EL-SHEIKH, Egypt: Countries adopted a hard-fought final agreement at the COP27 climate summit early on Sunday that sets up a fund to help poor countries being battered by climate disasters — but does not boost efforts to tackle the emissions causing them.

After tense negotiations that ran through the night, the Egyptian COP27 presidency released the final text for a deal and simultaneously called a plenary session to quickly gavel it through.

The session first swiftly approved the text’s provision to set up a “loss and damage” fund to help developing countries bear the immediate costs of climate-fueled events such as storms and floods.

But it kicked many of the most controversial decisions on the fund into next year, when a “transitional committee” would make recommendations for countries to then adopt at the COP28 climate summit in November 2023.

Those recommendations would cover “identifying and expanding sources of funding” — referring to the vexed question of which countries should pay into the new fund.

Calls by developing countries for such a fund have dominated the two-week summit, pushing the talks past their scheduled Friday finish.

And after a pause requested by Switzerland to review the final text, negotiators gave no objections as COP27 President Sameh Shoukry rattled through the final agenda items.

By the time dawn broke over the summit venue in the Egyptian resort of Sharm el-Sheikh, the deal was done.

The two-week summit has been seen as a test of global resolve to fight climate change — even as a war in Europe, energy market turmoil and rampant consumer inflation distract international attention.

Billed as the “African COP,” the summit in Egypt had promised to highlight the plight of poor countries facing the most severe consequences from global warming caused mainly by wealthy, industrialized nations.

Negotiators from the European Union and other countries had said earlier that they were worried about efforts to block measures to strengthen last year’s Glasgow Climate Pact.

“While progress on loss and damage was encouraging, it is disappointing that the decision mostly copy and pasted language from Glasgow about curbing emissions, rather than taking any significant new steps,” said Ani Desgupta, president of the non-profit World Resources Institute.

In line with earlier iterations, the approved deal did not contain a reference requested by India and some other delegations to phasing down use of “all fossil fuels.”

It instead called on countries to take steps toward “the phasedown of unabated coal power and phase-out of inefficient fossil fuel subsidies,” as agreed at the COP26 Glasgow summit.

The draft also includes a reference to “low-emissions energy,” raising concern among some that it opened the door to the growing use of natural gas — a fossil fuel that leads to both carbon dioxide and methane emissions.

Norway’s Climate Minister Espen Barth Eide told reporters his team had hoped for a stronger agreement. “It does not break with Glasgow completely, but it doesn’t raise ambition at all,” he said.

“I think they had another focus. They were very focused on the fund,” he said. For daily comprehensive coverage on COP27 in your inbox, sign up for the Reuters Sustainable Switch newsletter here.