Oil drops 12% for worst day since November as wild ride triggered by Russia disruption continues

Oil prices dropped in a sudden move on Wednesday, giving back some of the rally this month amid supply disruptions stemming from Russia’s invasion of Ukraine.

WTI crude oil tumbled more than 12%, or $15, to settle at $108.7 per barrel, registering its worst day since Nov. 26. Earlier this week, WTI topped $130 per barrel briefly — a 13-year high — during escalated geopolitical tensions.

Brent crude oil, the international benchmark, fell a similar 13%, or $16.8 to $111.1, for its biggest one-day drop since April 2020. Brent has just hit $139 on Monday, its highest since 2008.

The move in oil lower came amid indications of possible progress by the U.S. in encouraging more oil production from other sources. Reuters reported that Iraq said it could increase output if OPEC+ asks. Secretary of State Antony Blinken also signaled that UAE would support increased production by OPEC+.

A general view of oil tanks in the Transneft-Kozmino Port near the far eastern town of Nakhodka, Russia.Yuri Maltsev | Reuters

“That $130 price point was factoring in the absolute siege mentality in the oil market, where we were staring down potentially losing all Russian output, OPEC not budging and the Ukraine situation just worsening,” John Kilduff of Again Capital said on CNBC’s “The Exchange.” “Now we’ve reversed all of that, seemingly, to a degree at least. I don’t want to get ahead of myself.”

Last week, the International Energy Agency released 60 million barrels of oil reserves to compensate for supply disruptions following Russia’s invasion, and the agency called the move “an initial response” and said more could be released if needed.

Still, oil prices have surged this month with WTI crude oil up roughly 15% as Russia, the world’s second-largest crude exporter, invaded Ukraine.

“The world is working together to tackle surging oil prices and that has put a short-term top for crude,” Ed Moya, senior market analyst at Oanda, said in a note.

The United Kingdom announced its own restrictions on buying Russian oil imports, saying it will phase out the country’s imports by the end of the year. The European Union also unveiled a plan to wean itself off of Russian fossil fuels.

The close: S&P 500 posts biggest one-day rally since June 2020 as oil prices dive

U.S. stocks surged on Wednesday led by financial and tech shares, rebounding from several down days as oil prices pulled back sharply after fanning inflationary fears and investors gauged developments in the Ukraine crisis.

The S&P 500 posted its biggest one-day percentage gain since June 2020, while the Nasdaq tallied its biggest rise since March 2021.

Global oil prices posted their biggest plunge since the early pandemic days nearly two years ago, after the United Arab Emirates said the OPEC member would support increasing output into a market in disarray because of supply disruptions caused by sanctions imposed on Russia over its conflict with Ukraine.

A steep rise in oil and other commodities has sparked concerns about a further jolt to rising inflation and the potential for slowing economic growth.

“I think it is an oversold rally on cooling in commodities,” said Walter Todd, chief investment officer at Greenwood Capital. “Stocks have been sold pretty aggressively for a few days. I don’t know that it permanently changes the direction of things.”

The Dow Jones Industrial Average rose 653.61 points, or 2%, to 33,286.25, the S&P 500 gained 107.18 points, or 2.57%, to 4,277.88 and the Nasdaq Composite added 460.00 points, or 3.59%, to 13,255.55.

The heavyweight technology group and financials were the top-gaining S&P 500 sectors, rising 4% and 3.6% respectively.

Energy, which has been the standout sector performer in 2022, fell 3.2% as benchmark Brent crude slid to around $110 a barrel from over $130 earlier in the week.

Travel and leisure stocks, which have been hit hard recently, also soared, with shares of Carnival Corp rising 8.8% and United Airlines Holdings up 8.3%.

“The market is taking a break, consolidating from this downtrend that has seen a lot of stocks getting really, really hammered, especially on the growth side of the market,” said Anu Gaggar, global investment strategist for Commonwealth Financial Network.

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In the latest developments, Ukraine accused Russia of bombing a children’s hospital in the besieged port of Mariupol during an agreed ceasefire to enable civilians trapped in the city to escape.

Ukraine’s Foreign Minister Dmytro Kuleba was due to meet Russian foreign minister Sergei Lavrov in Turkey on Thursday.

Stocks have struggled as concerns about the Russia-Ukraine crisis have deepened a sell-off initially fueled by worries over higher bond yields as the Federal Reserve is expected to tighten monetary policy this year to fight inflation.

On Monday, the Nasdaq confirmed it was in a bear market, falling over 20% from its record high, while the Dow Jones Industrial Average confirmed it was in a correction as it closed more than 10% lower from its record peak.

Investors were awaiting Thursday’s report on U.S. consumer prices as a key data release ahead of the Fed’s March 15-16 meeting.

Advancing issues outnumbered declining ones on the NYSE by a 2.75-to-1 ratio; on Nasdaq, a 3.66-to-1 ratio favored advancers.

The S&P 500 posted two new 52-week highs and three new lows; the Nasdaq Composite recorded 32 new highs and 53 new lows.

About 14 billion shares changed hands in U.S. exchanges, compared with the 13.6 billion daily average over the last 20 sessions.

Nickel prices leap to a record over global supply fears and short sales

The London Metal Exchange (LME) suspended nickel trading on Tuesday, after the price of the base metal skyrocketed to a record amid escalating uncertainty around major supplier Russia, and after an intense short squeeze.

Nickel rose to a record US$101,365 per tonne, more than doubling in a matter of hours. The previous all-time high was US$51,800 per tonne reached in 2007, at the tail end of a near-decade long economic boom.

Bart Melek, head of commodity strategy at TD Securities Inc., wrote in a note to clients that the “epic” rally on the LME was ignited by fears that global supplies will tighten, but then took on “a life of its own,” as traders failed to make margin calls.

When a nickel futures contract is sold short, traders borrow the securities from a brokerage, and then immediately sell in the hope the price will fall. If the trade works out, the investor buys back at the lower price, returns the security to the original investor, and books a profit. In this case, the opposite happened, and at warp speed. The nickel price jammed dramatically higher in a matter of hours, leaving shorts with massive paper losses. As traders moved to cover their positions, their purchases put even more intense upward pressure on nickel.

“How much supply comes from Russia, how messed up it is, how people hedge themselves more than they used to,” said Bill Harris, portfolio manager with Toronto-based Avenue Investment Management. “It’s just stunning what can happen.”

The LME, one of a handful of key global venues for metals trading, said it is planning to reopen the nickel trading market in an orderly fashion after cancelling Tuesday’s trades. But the timing is uncertain, and market watchers are bracing for more volatility.

“Big earthquakes create big aftershocks,” said Mark Selby, chief executive officer of Canada Nickel Co. Inc. “I think you’re going to see substantial, US$10,000-a-tonne a day moves in the metal price over the next couple of months.”

The nickel and wider commodity markets have experienced intense market dislocation in the past and recovered. In 1980, the Hunt brothers of Dallas famously manipulated the silver market, and were instrumental in the price of the precious metal rocketing five-fold in a few months. Later that decade, the LME shut down trading in tin for about four years after the international tin cartel collapsed. A retail buying binge driven by social media caused wild swings in the prices of uranium and silver last year.

From gasoline to beer: How war in Ukraine could affect inflation

The disruption in the nickel market follows volatility in other commodities since Russia invaded Ukraine. Crude oil, potash and wheat have exploded in price because of Russia’s importance as a supplier. Gold, historically an asset of last resort during times of great uncertainty, is also trading near an all-time high.

Nickel is one of the workhorse metals of the global economy. A key input in the manufacture of stainless steel, it is also increasingly used in electric car batteries, and alongside lithium and cobalt, pitched as part of a trifecta of metals used in the transition to cleaner energy.

After Indonesia and the Philippines, Russia is the world’s third-largest nickel producer. Last year, it produced 250,000 tonnes, or close to 13 per cent of global output.

Canada is the sixth biggest global player, but over the past few decades, its influence has waned. Canada’s overall production has fallen more than 35 per cent since the mid-2000s, in large part owing to mine depletion. None of the publicly traded Canadian-owned nickel giants are left. The biggest producers were sold in the 2000s to foreign companies, which was controversial even at the time. Brazil’s Vale Ltd. bought Inco Ltd., the operator of both major mines in Sudbury and Voisey’s Bay in Labrador. Xstrata PLC, now Glencore PLC, bought Falconbridge Inc., the operator of mines in Sudbury, as well as Raglan in Quebec. Canadian Royalties Inc. sold the Nunavik nickel project in northern Quebec to Chinese state-owned enterprise Jilin Jien Nickel Industry Co. Ltd.

Mr. Selby, a former Inco executive, laments the sale of these assets, saying “there’s no way” the Canadian government would allow that now, especially given the importance of nickel to the country’s economic security.

He pointed to the recent furor after the federal government allowed the sale of Canadian lithium development company Neo Lithium Corp. to a Chinese state-controlled company without a formal national security review as evidence that the zeitgeist has changed. The sale of Neo Lithium incited fierce debate over how far Canada should go to protect its critical minerals industries, and resulted in parliamentary hearings that put the federal industry minister on the defensive.

Oil falls as investors weigh U.S. import ban

PUBLISHED WED, MAR 9 2022

Oil slipped towards $125 a barrel in volatile trading on Wednesday as investors assessed the U.S. ban of Russian oil imports and Russia announced a new ceasefire in Ukraine on Wednesday to let civilians flee.

A view that the U.S. ban of Russian oil imports may not worsen shortages kept a lid on prices, traders said, as did talk that Ukraine was no longer seeking NATO membership after some news reports this week on the issue.

“Maybe this is playing its part,” said Tamas Varga of oil broker PVM said of the Ukraine NATO membership issue.

“The realization that the U.S. import ban might not materially make the current supply shock worse than it has been might have also triggered this bout of profit-taking,” he added.

Brent crude fell $2.27, or 1.8%, to $125.71 a barrel at 1105 GMT, after earlier rising above $131. U.S. West Texas Intermediate (WTI) fell $3.19, or 2.6%, to $120.51.

Oil also fell as the head of the International Energy Agency described the agency’s decision last week to release 60 million barrels of oil reserves to compensate for supply disruptions following Russia’s invasion as “an initial response” and that more could be released if needed.

Oil has surged since Russia, the world’s second-largest crude exporter, launched what it called a “special operation” in Ukraine. Brent hit $139 on Monday, its highest since 2008.

On Wednesday, Russia announced a new ceasefire in Ukraine to let civilians flee besieged cities, after days of mostly failed promises that have left hundreds of thousands of Ukrainians trapped without access to medicine or fresh water.

In addition to the U.S. decision, Britain also said on Tuesday it would phase Russian imports out and Shell said it would stop buying Russian crude. JP Morgan estimated around 70% of Russian seaborne oil was struggling to find buyers.

One potential source of extra oil supply is Iran, which has been in talks with Western powers for months on restoring a deal which lifted sanctions on Iran in return for curbs on its nuclear programme.

Iran’s chief negotiator in the Vienna talks returned to the Austrian capital on Wednesday.

Amid concern over supply shortages, there are some signs the market is not short of crude yet.

U.S. crude inventories rose by 2.8 million barrels, according to market sources, citing figures from the American Petroleum Institute, an industry group, on Tuesday. Official U.S. inventory figures are due at 1530 GMT.

Before the Bell: Mar 9

Equities

Wall Street futures jumped early Wednesday as market volatility continues with traders looking to assess the impact of high crude prices and Western sanctions on Russia. Major European markets were up after three sessions of losses. TSX futures also gained.

In the early premarket period, futures linked to the key U.S. indexes were all up more than 1 per cent with Nasdaq futures approaching a 2-per-cent increase. On Tuesday, all three finished weaker after a wild session that saw big swings. The Dow finished down 0.5 per cent despite seeing a gain of more than 500 points at one point in the day. The S&P/TSX Composite Index ended down 0.34 per cent with energy shares helping limit the losses.

“Stock markets are highly volatile as uncertainties loom,” Michael Hewson, chief market analyst with CMC Markets U.K., said.

“The European indices rallied at yesterday’s open yet the gains remained short-lived. This is because the rallies are mostly driven by intra-day trades, whereas longer term investors are leaving the market; hedge funds and the like are reportedly cutting exposure and covering shorts as visibility became very limited.”

On Tuesday, crude prices jumped after the U.S. announced it would ban imports of Russian oil. The day also saw a number of big-name companies including McDonald’s, Starbucks and Coca-Cola join other firms in suspending operations in Russia in response to the invasion of Ukraine.

The Globe’s Susan Krashinsky Robertson reports that, in contrast to its fast-food rival, Burger King locations in Russia remain open. Burger King’s Toronto-based parent company, Restaurant Brands International Inc. – which also owns Tim Hortons and Popeyes Louisiana Kitchen – released a statement on Tuesday expressing “horror” at the attack on Ukraine. Chief corporate officer Duncan Fulton wrote that Burger King’s more than 800 locations in the country are owned and operated by franchisees. “We have long-standing legal agreements that are not easily changeable in the foreseeable future.”

On the corporate side, auto parts maker Linamar reports earnings after the close of trading.

In Europe, the pan-European STOXX 600 was up more than 3 per cent in early trading. Britain’s FTSE 100 gained 2.02 per cent. Germany’s DAX and France’s CAC 40 were both up about 4 per cent.

In Asia, Japan’s Nikkei finished down 0.30 per cent after a weak handoff from Wall Street. Hong Kong’s Hang Seng slid 0.67 per cent.

Commodities

Crude prices pulled back slightly in early going but remained at elevated levels amid supply concerns in the wake of the U.S. decision to bank Russian oil.

The day range on Brent is US$125.87 to US$131.64. The range on West Texas Intermediate is US$121.01 to US$126.84. Prices had been rising through much of the overnight period but cooled slightly in the predawn period. Both benchmarks jumped Tuesday on the U.S. announcement.

“A grasping-at-straws sentiment rally around the Ukraine and Russia could still send Brent crude and WTI US$10 lower quite quickly, especially as both are grossly overbought on the technicals,” OANDA senior analyst Jeffrey Halley said in a note.

“Any dips are likely to be short-lived, however.”

Meanwhile, there are signs the market is not yet short of oil.

Reuters reports that U.S. crude inventories rose by 2.8 million barrels, according to market sources citing figures from the American Petroleum Institute. Official U.S. inventory figures are due later Wednesday morning.

In other commodities, gold prices eased from near record highs on as the U.S. dollar held close to a 21-month peak and investors took profits.

Spot gold was down 0.4 per cent at US$2,044.60 per ounce, after climbing in the previous session to US$2,069.89, a whisker away from its record US$2,072.49 scaled in August 2020. U.S. gold futures rose 0.8% to US$2,058.80.

Currencies

The Canadian dollar gained, trading above 78 US cents, as risk sentiment improved and the U.S. dollar held near its highest level in 22 months against a group of world currencies.

The day range on the loonie is 0.77.55 US cents to 78.09 US cents.

“The CAD has picked up a little ground overnight with the USD’s gains yesterday and early in Asian trading blocked around the 1.29 level,” Shaun Osborne, chief FX strategist with Scotiabank, said in a note. “The CAD is a middling performer among the major currencies, however, and is lagging its G10 commodity currency peers on the day.”

There were no domestic releases due Wednesday. Investors are now looking ahead to Friday’s February jobs report from Statistics Canada.

On world markets, the U.S. dollar against a basket of currencies was 0.35-per-cent lower at 98.764, just below a 22-month peak touched on Monday.

After touching a 22-month low on Monday sliding to as much as $1.0806, the euro rose 0.5 per cent on the day to US$1.0946 helped by a report citing unnamed officials that said the European Union was discussing joint bond issuance, according to Reuters.

Britain’s pound rose 0.3 per cent against the U.S. dollar to US$1.3134.

US$0.7786+0.0029 (0.3687%)

Economic news

(10 a.m. ET) U.S. Job Openings & Labor Turnover Survey for January.

With Reuters and The Canadian Press

S&P 500 rebounds from worst day since 2020 as investors bet worst of the sell-off may be over

The S&P 500 rebounded on Tuesday following the benchmark’s worst day since October 2020, as investors bet that selling induced by geopolitical risks has gone far enough.

The broad equity benchmark traded 0.7% higher, after its largest one-day decline in more than a year on Monday. The Nasdaq Composite rose roughly 1.2%, after falling into bear market territory in the previous session. The Dow Jones Industrial Average added about 250 points.

The major averages reversed their earlier losses as commodities’ rally slowed.

Shares of Chevron and Exxon each rose 5% and 2.5%, respectively. Plus, solar and other clean energy stocks moved higher as the continued rise in oil prices shifted focus toward alternative energy sources. Enphase Energy and SunPower added 14% and 21%, respectively.

Stocks rebounded broadly on Tuesday. There was buying in mega-cap tech with Meta Platforms 4% higher and Tesla up nearly 5%.

Airlines and cruise lines also advanced. Delta Air Lines rose 6% and American Airlines popped more than 9%. Southwest and United Airline were up 7% a piece. Norwegian Cruise Line also rose more than 7%.

Tuesday’s “bounce was a small victory that the low may be in, but it may have to be tested again either later today or later this week,” said Jim Paulsen, chief investment strategist for the Leuthold Group.

Investors continue to evaluate surging commodity prices and slowing economic growth stemming from Russia’s invasion of Ukraine. Rising prices for oil, gasoline, natural gas, and precious metals like nickel and palladium are fueling concerns about a slowdown in global growth amid surging inflation.

WTI crude oil jumped about as much as 7% to above $128 a barrel on Tuesday as President Joe Biden said the U.S. will ban Russian oil imports. Oil prices spiked to start the week with U.S. crude hitting a 13-year high of $130.

“Perhaps there’s some relief that only the US is cutting off Russian oil/gas right away while the UK and EU implement their plans over the course of several quarters. In addition, while the consensus narrative on Russia/Ukraine is quite gloomy, the ingredients for a ceasefire are falling into place,” said Adam Crisafulli, founder of Vital Knowledge.

John Kilduff, Founding Partner of Again Capital, said oil taking a second run at $130 and failing “induces some selling.”

The international benchmark, Brent crude, reached a high of $139.13 at one point overnight Sunday before settling at $123.21 per barrel, its highest since July 2008. Brent most recently was up 2% to $126.

The jump in crude is already starting to hit consumers’ wallets. The national average for a gallon of regular gas rose to $4.173 on Tuesday, according to AAA. The prior record was $4.114 from July 2008, not adjusted for inflation.

Other commodity prices also resumed their push higher. Nickel prices on Tuesday briefly touched a new record above $100,000 a metric ton.

Futures for palladium, a key metal in the manufacture of electronics, jumped another 5% to $3.04 an ounce, while platinum futures rose nearly 3% to $1,149.70 an ounce.

Treasury yields also were sharply higher, with the benchmark 10-year note up close to 10 basis points to 1.85% as investors shed bonds as inflation fears escalate. Yields move opposite price.

The market action came after a steep sell-off on Wall Street where the S&P 500 dropped nearly 3% for its worst day since October 2020. The blue-chip Dow tumbled almost 800 points for its fifth negative session in six, while the Nasdaq Composite, which contains many of the market’s biggest tech names, slid 3.6%, falling into bear market territory, down 20% from its record high from November.

Investors continued to monitor developments of escalated geopolitical tensions. Ukraine said Moscow is seeking to manipulate its cease-fire arrangement by only allowing Ukrainian civilians to evacuate to Russia and Belarus.

Shell apologized for buying cheap Russian oil and said it was divesting itself of all hydrocarbon holdings in the country. Russia itself warned that crude prices could hit $300 a barrel should Western countries enact a ban on exports. Shell shares popped 3% on Tuesday.

“There seems to be no evidence of improvements in Ukraine and the rhetoric out of D.C. continues to get more hawkish,” said Cliff Hodge, chief investment officer at Cornerstone Wealth. “While it’s impossible to know where the ultimate bottom may be, from a risk-reward standpoint, the market looks very reasonable.”

Crude oil jumps with the U.S. set to ban Russian imports

Oil prices jumped to their highs of the session with the U.S. set to ban Russian oil imports.

WTI crude oil rose 7.4% to trade at $128.28 per barrel. Brent crude oil, the international benchmark, jumped 7.7% to $132.75.

The U.S. will announce a ban of Russian oil imports as soon as today, a person familiar with the matter told CNBC. The ban would be without European participation and include liquefied natural gas and coal, according to a Bloomberg News report.

In 2021, the U.S. imported about 672,000 barrels per day of oil and refined products from Russia, or about 8% of total imports, according to Andrew Lipow, president of Lipow Oil Associates, based on data from the Energy Information Administration.

A man pumps gas into his vehicle at a petrol station in Montebello, California on February 23, 2022, as gas prices hit over $6 dollars per gallon.Frederic J. Brown | AFP | Getty Images

The market has already been self-sanctioning the Russian energy complex, with buyers avoiding the nation’s oil.

“Estimates vary, but it is probably fair to say that should an import ban be imposed on Russia the additional volume that becomes unavailable would be relatively limited,” said Tamas Varga at brokerage PVM.

“The de facto ban on Russian crude oil imports is here with or without government legislation,” Lipow added.

The national average for a gallon of regular gas rose to $4.173 on Tuesday, according to AAA.

The prior record was $4.114 from July 2008, not adjusted for inflation.

Tuesday’s new high follows a sharp spike in gas since Russia invaded Ukraine, sending oil prices surging.

Consumers are paying 55 cents more than one week ago, and about 72 cents more than last month.

Experts expect oil prices — and therefore prices at the pump — to remain elevated.

“Unless something drastic happens, we are headed for average pump prices in the $4.50-$4.75 gallon range for motor fuel and beyond $5 gal for diesel,” said Tom Kloza, head of global energy analysis at Oil Price Information Services.

Oil prices, meantime, jumped Sunday to prices last seen in 2008.

West Texas Intermediate crude futures, the U.S. oil benchmark, traded as high as $132.07. International benchmark Brent crude hit $139.13. But both settled well below those highs during Monday’s trading session.

Russia is a key oil and gas producer and exporter, and the country’s war on Ukraine is disrupting the global market.

“Given Russia’s key role in global energy supply, the global economy could soon be faced with one of the largest energy supply shocks ever,” Goldman Sachs said Monday in a note to clients.

Russia warns of $300 oil, threatens to cut off European gas if West bans energy imports

Russia has threatened to close a major gas pipeline to Germany and warned of $300 oil prices if the West goes ahead with a ban on its energy exports.

“It is absolutely clear that a rejection of Russian oil would lead to catastrophic consequences for the global market,” Russian Deputy Prime Minister Alexander Novak said Monday in an address on state television.

“The surge in prices would be unpredictable. It would be $300 per barrel if not more.”

Novak also cited Germany’s decision last month to halt the certification of the highly contentious Nord Stream 2 gas pipeline, saying: “We have every right to take a matching decision and impose an embargo on gas pumping through the Nord Stream 1 gas pipeline.”

“So far, we are not taking such a decision,” Novak said. “But European politicians with their statements and accusations against Russia push us towards that.”

His comments come with Russia’s onslaught of Ukraine well into its second week, with the already dire humanitarian crisis expected to worsen as the Kremlin continues its invasion.

The U.N. has said 1.7 million refugees have left Ukraine since Russia’s invasion of the country began on Feb. 24, describing it as “the fastest-growing refugee crisis in Europe since World War II.”

The U.S. has been considering whether to impose a ban on Russia’s oil and gas exports as a way of punishing Moscow.

Germany, the Netherlands and the U.K. have appeared to back away from a coordinated Western embargo on Russian energy exports, however.WATCH NOWVIDEO02:19Fundamental energy infrastructure shift might happen ‘pretty soon’: KPMG

Energy analysts have warned that a ban on Russia’s oil and gas would have seismic repercussions for energy markets and the world economy.

Russia is the world’s third-largest oil producer, behind the U.S. and Saudi Arabia, and the world’s largest exporter of crude to global markets. It is also a major producer and exporter of natural gas.

The European Union receives around 40% of its gas via Russian pipelines, several of which run through Ukraine.

Novak: ‘We are ready for it’

“European politicians need to honestly warn their citizens and consumers what to expect,” Novak said.

“If you want to reject energy supplies from Russia, go ahead. We are ready for it. We know where we could redirect the volumes to,” he added, without providing further details.

Oil prices soared to 14-year highs on Monday, as energy market participants focused on the prospect of full sanctions on Russia’s energy exports.

International benchmark Brent crude futures rose 2.1% to trade at $125.75 a barrel on Tuesday morning in London, while U.S. West Texas Intermediate futures were 2% higher at $121.83.WATCH NOWVIDEO04:16Second Cold War emerging, argues Latvian foreign minister

European policymakers are under immense pressure to bring a swift end to their dependence on Russian fossil fuels, particularly as energy-importing countries continue to refill President Vladimir Putin’s war chest with oil and gas revenue on a daily basis.

Indeed, revenue from Russian oil and gas was seen to be responsible for roughly 43% of the Kremlin’s federal budget between 2011 and 2020, highlighting how fossil fuels play a central role for the Russian government.

Ukraine Foreign Minister Dmytro Kuleba has called on Western allies to impose a “full embargo” on Russian oil and gas, saying via Twitter that “buying them now means paying for the murder of Ukrainian men, women and children.”

U.S. Secretary of State Antony Blinken told NBC on Sunday that President Joe Biden’s administration was in “very active discussions” with European governments about banning imports of Russian crude and natural gas.

Western sanctions imposed on Russia over the invasion have so far been carefully constructed to avoid directly hitting the country’s energy exports, although there are already signs the measures are inadvertently prompting banks and traders to shun Russian crude.

‘Step-by-step process’

German Chancellor Olaf Scholz on Monday pushed back against calls to ban Russian oil and gas, saying such a move could put Europe’s energy security at risk and imports from Russia were critically important to citizens’ daily lives.

Speaking at a news conference on Monday, U.K. Prime Minister Boris Johnson appeared to align himself with Germany’s Scholz in backing away from plans to impose an oil embargo on Russia.

“You can’t simply close down use of oil and gas overnight, even from Russia. That’s obviously not something that every country around the world can do,” Johnson said.WATCH NOWVIDEO02:52It’s not that Russian oil won’t find buyers, it’s that U.S. and Europe will see higher prices, says Energy Aspect’s Sen

Dutch Prime Minister Mark Rutte, meanwhile, said at the same news conference that cutting Russian oil and gas imports would need to be a “step-by-step process.”

“We have to make sure to deleverage our dependency on Russian gas, on Russian oil, while acknowledging at the moment that the dependency is, to a certain extent, still there,” Rutte said.

The European Union on Tuesday is set to outline a raft of measures designed to reduce the bloc’s reliance on Russian gas.

Meanwhile, the world’s leading climate scientists delivered a landmark report last week that reaffirmed the urgent need to rapidly phase out fossil fuels in order for humanity to avoid the worst impacts of the climate crisis.

U.N. Secretary-General Antonio Guterres described the Intergovernmental Panel on Climate Change’s report on the real-world impacts of the climate emergency as an “atlas of human suffering.”

Guterres said the IPCC’s findings once again make it clear that “fossil fuels are choking humanity.”

Crude oil jumps with the U.S. set to ban Russian imports

Oil prices jumped to their highs of the session with the U.S. set to ban Russian oil imports.

WTI crude oil rose about 4.6% to trade at $124.90 per barrel. Brent crude oil, the international benchmark, jumped 5% to $129.42 per barrel.

The U.S. will announce a ban of Russian oil imports as soon as today, a person familiar with the matter told CNBC. The ban would be without European participation and include liquefied natural gas and coal, according to a Bloomberg News report.

In 2021, the U.S. imported about 672,000 barrels per day of oil and refined products from Russia, or about 8% of total imports, according to Andrew Lipow, president of Lipow Oil Associates, based on data from the Energy Information Administration.

The market has already been self-sanctioning the Russian energy complex, with buyers avoiding the nation’s oil.

“Estimates vary, but it is probably fair to say that should an import ban be imposed on Russia the additional volume that becomes unavailable would be relatively limited,” said Tamas Varga at brokerage PVM.

“The de facto ban on Russian crude oil imports is here with or without government legislation,” Lipow added.

Prices at the pump surge

Americans are now paying the most at the pump on record as energy prices surge, contributing to rampant inflation that’s hitting all areas of the economy.

The national average for a gallon of regular gas rose to $4.173 on Tuesday, according to AAA.

The prior record was $4.114 from July 2008, not adjusted for inflation.

Tuesday’s new high follows a sharp spike in gas since Russia invaded Ukraine, sending oil prices surging.

Consumers are paying 55 cents more than one week ago, and about 72 cents more than last month.

Experts expect oil prices — and therefore prices at the pump — to remain elevated.

“Unless something drastic happens, we are headed for average pump prices in the $4.50-$4.75 gallon range for motor fuel and beyond $5 gal for diesel,” said Tom Kloza, head of global energy analysis at Oil Price Information Services.

Oil prices, meantime, jumped Sunday to prices last seen in 2008.

West Texas Intermediate crude futures, the U.S. oil benchmark, traded as high as $132.07. International benchmark Brent crude hit $139.13. But both settled well below those highs during Monday’s trading session.

Russia is a key oil and gas producer and exporter, and the country’s war on Ukraine is disrupting the global market.

“Given Russia’s key role in global energy supply, the global economy could soon be faced with one of the largest energy supply shocks ever,” Goldman Sachs said Monday in a note to clients.