Crude oil's rally continued unabated today even after the United States and several of its international allies said they may release oil from their reserves in response to the high prices.
Reuters reported that the United States and its allies were discussing the coordinated release of between 60 and 70 million barrels of crude in response to the latest moves in oil prices, which were prompted by fears of supply disruption after the Russian invasion of Ukraine.
Russia's crude oil exports average 4 to 5 million barrels daily, plus another 2 to 3 million barrels daily of oil products. These flows, however, have been disrupted after the West slammed a barrage of sanctions on Moscow, including suspending several banks from the SWIFT international system.
The sanctions have sent commodity traders reeling, with some buyers shunning Russian oil, Reuters reported, and others finding it difficult to pay for the cargo and find tankers to transport them. Meanwhile, the UK has closed its ports to all Russian or Russia-related vessels, the report also said.
So far, the West has not resorted to direct sanctions on Russia's oil and gas industry, but according to White House press secretary Jen Psaki, these are not off the table, either. These, however, could have "extreme consequences for the world energy markets, particularly ours and Europe's," Psaki said.
Meanwhile, prices at the pump across the United States continue to rise. According to the AAA, the average per gallon of regular at $3.610, up by $0.06 in a day. In Los Angeles, the average gas price has broken a new record, reaching $4.89 this week. The average for the state, according to the AAA, stood at $4.827 per gallon.
With regards to the planned concerted release of oil reserves, "It should have a significant psychological effect on oil market sentiment, because it would signal to the market that the main oil-consuming nations are determined to try to prevent a further spike in oil prices," FG Energy analysts wrote in a note.
By Irina Slav for Oilprice.com
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