With WTI crude testing $125 per barrel amid talks of a ban on imported Russian crude, U.S. gas prices are set to surpass their all-time high of $4.103 per gallon later this week.
Global oil prices surged to the highest levels since the financial crisis Monday, with Brent crude briefly testing $140 per barrel, as world leaders extended talks on banning crude imports from Russia following last week’s invasion of Ukraine.
Average U.S. gasoline prices, meanwhile, topped $4 a gallon for the first time since 2008 heading into the beginning of the week, and are now within touching distance of the all-time high of $4.103, according to the consumer website Gasbuddy.com
“This is a milestone that was hard to imagine happening so quickly, but with bipartisan support of severe sanctions on Russia, is not exactly surprising – it is the cost of choking off Russia from energy revenue,” said Patrick De Haan, head of petroleum analysis for GasBuddy. “As Russia’s war on Ukraine continues to evolve and we head into a season where gas prices typically increase, Americans should prepare to pay more for gas than they ever have before. Shopping and paying smart at the pump will be critical well into summer.”
House Speaker Nancy Pelosi told lawmakers Sunday that Congress would be “exploring strong legislation” to ban Russian crude imports, although the total is only around 3% of U.S. consumption and wouldn’t likely impact global markets if that were done on a stand-alone basis.
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However, with Japan, the European Union and other western allies ready to follow suit, weekend prices surged in anticipation of the removal of Russia’s 5 million barrels from global markets.
Delays in talks between the U.S. and Iran linked to Tehran’s nuclear program also added upward price pressures, with investors now focused on any near-term reaction from Saudi Arabia and other OPEC members, who only last week held their monthly output increase to 400,000 barrels per day following a meeting in Vienna.
WTI futures for April delivery were marked $7.13 higher at $122.81 per barrel while Brent contracts for May surged $7.37 to $125.47 per barrel, the highest in more than a decade.
“Russian produced products and commodities have become increasingly toxic with self-sanctioning by oil energy buyers already being felt,” said Ole Hansen, head of commodity strategy at Saxo Bank. “Brent crude around $130 has by now reached a level where demand destruction will start to set in with consumers self-rationing their needs while heavy fuel consuming industries may also start.”
“Whether the drop will happen fast enough to prevent an even bigger jump remains to be seen,” he added.
U.S. oil majors were also on the move, with Exxon Mobil (XOM) – Get Exxon Mobil Corporation Report rising 2.03% to $85.80 in pre-market trading and Chevron (CVX) – Get Chevron Corporation Report jumping 2.29% to $162.28 each.
Occidental Petroleum (OXY) – Get Occidental Petroleum Corporation Report, meanwhile, surged 8% to $60.60 each following reports that activist investor Carl Ichan has sold his 10$ stake in the group, while billionaire investor Warren Buffett boosted his holdings by 30 million shares, taking his stake to 11.2%.
