Oil prices remain elevated as Russia warns to cut Europe gas supplies

ISLAMABAD: Oil prices remained elevated on Tuesday after hitting a 14-year high a day earlier, as Russia has warned that it retains the option to cut natural gas supplies to Europe if the US and its EU allies ban its crude imports.

As of 1300 hours GMT, Brent, the international benchmark for two-thirds of the world’s oil, gained $3.02 (+2.45 percent) to reach 126.23 a barrel. Brent hit the mark of $139.13 a barrel a day earlier before settling lower. Brent had hit a record high of $147.02 on July 11, 2008.

The West Texas Intermediate (WTI), the main oil benchmark for North America, reached $121.73 a barrel, up by $2.33 (+1.95 percent). The contract hit $130.50 a barrel a day earlier. WTI had soared to its highest level of $146.90 on July 11, 2008 amid the global financial crisis.

The price for Opec Basket was recorded at $113.15 a barrel with a decrease of 3.34 percent, Arab Light was available at $124.83 a barrel with an increase of 1 percent and the price of Russian Sokol jumped to $114.64 a barrel with 0.38 percent increase.

Russian Deputy Prime Minister Alexander Novak, who is also in charge of energy affairs, said in a televised speech on Monday that Moscow could stop the flow of gas through pipelines from the country to Germany after Berlin decided to stop the opening of the new Nord Stream 2 pipeline.

“We understand that in connection with the unfounded accusations against Russia regarding the energy crisis in Europe and the imposition of a ban on Nord Stream 2, we have every right to take a mirror decision and impose an embargo on gas pumping through the Nord Stream 1 gas pipeline,” Novak said.

“So far, we are not making this decision. No one will benefit from this. Although European politicians are pushing us to this with their statements and accusations against Russia,” he said. He further said that a ban on Russian crude  would lead to catastrophic consequences for the global market. He added that oil prices could soar to $300 a barrel or more.

Russia supplies about 40 percent of Europe’s gas while its crude accounts for about 3 percent of US oil imports, equal to about 200,000 barrels a day.

According to Goldman Sachs, a sustained $20 oil rise shock would lower real economic growth in the Euro area by 0.6 percent and by 0.3pc in the United States. But in a more adverse scenario if Russian gas shipments via Ukraine are curtailed, then Euro area GDP could fall by as much as 1pc from gas alone.

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