Oil prices soar as Western allies discuss Russian import ban

Oil prices soared on Monday to more than $139 a barrel after the US said it was in “active discussions” to ban Russian crude imports, shaking markets as Moscow claimed it would pause bombing in Ukraine to allow civilians to escape four frontline cities.

The international benchmark Brent surged to $139.13 a barrel on Monday morning, almost 20 per cent above its settlement price on Friday, hitting its highest level since the 2008 financial crisis.

The jump came after US secretary of state Antony Blinken said on Sunday that he was discussing an oil ban with allies and US President Joe Biden. The White House had previously been reluctant to consider the move, warning it would drive up prices for consumers.

Markets reacted sharply, with stocks tumbling and the euro falling in early trading as investors calculated the consequences of a protracted rise in energy prices. Hong Kong’s Hang Seng index fell 3.3 per cent, on track for its lowest close since the beginning of the pandemic.

European wholesale natural gas prices also rallied sharply, with futures jumping to a new record high of €239 per megawatt hour, from about €193 on Friday. A year ago, the price was around €16.

Any restrictions on oil trade would pile pressure on Russia’s increasingly isolated economy, which has been hit hard by sanctions and a growing corporate boycott that this weekend was joined by payments giants Mastercard, Visa and American Express.

Asked about Blinken’s comments, a senior French official said that further sanctions were being examined by European and “other” partners, without detailing how advanced the discussions were.

“The question today is to see how we can resort to strategic reserves to stop prices from spiralling even further on oil and gas markets, and also, in the longer term, how we manage our stocks and our supplies,” the official said.

British officials are not ruling out a total ban on Russian oil imports but one described the idea as “a drastic move”. Liz Truss, UK foreign secretary, has asked officials to explore a “ceiling” on Russian energy imports that would fall over time, mitigating the likely economic shock.

The turmoil in commodity markets came as Russia offered to suspend attacks on Kharkiv, Kyiv, Sumy and Mariupol on Monday morning and create humanitarian corridors out of the cities, amid growing international alarm over the civilian toll of Vladimir Putin’s invasion.

Russia declared its temporary ceasefire would start at 10am Moscow time but it is unclear how many Ukrainian civilians will want to take up the Russian offer. Most of the humanitarian corridors Moscow is creating end up in Russia itself.

Through 12 days of war, Russian forces have used heavy weapons to bombard civilian infrastructure in crowded cities, hitting schools, hospitals and residential buildings.

Shelling continued at a high intensity over the weekend, according to western officials, while Russia resupplied its armoured forces positioned around Kharkiv and Kyiv, potentially preparing for a renewed offensive.

So far, more than 1.5mn Ukrainians have fled the country, with close to 1mn crossing the border into Poland. The refugee crisis is the fastest growing in Europe since 1945, according to the UN.

Russia said its offer of a ceasefire followed “a personal request” from French President Emmanuel Macron, who spoke to Vladimir Putin at length on Sunday. The move was announced by the “interdepartmental staff for humanitarian response in Ukraine”, an official Russian body, in a statement carried by Interfax.

Attempts over the weekend to enforce a ceasefire in the besieged port city of Mariupol failed, with Ukraine and Russia accusing each other of violating its terms. Residents of the city have faced shortages of food, water, electricity and heating in freezing weather.

“In view of the catastrophic humanitarian situation and its abrupt deterioration in the cities of Kyiv, Kharkiv, Sumy and Mariupol, and also on the personal request French President Emmanuel Macron made of Russian President Vladimir Putin, the Russian armed forces declare, for humanitarian purposes, a “regime of quiet” from 10am on 7th March 2022 and are opening humanitarian corridors,” the Russian statement said.

The staff said that some corridors presuppose the evacuation of civilians from Ukrainian towns to Russia.

The statement goes on to list the routes of the corridors. From Mariupol there will be two — one going to the Russian city of Rostov, one going west to Zaporizhzhia.

From Kyiv the route is north to the Belarusian city of Gomel, and from there by air to Russia. From Kharkiv the route is to the Russian city of Belgorod, and from there by plane, train and car to temporary locations, presumed to be in Russia. From Sumy there are two routes — to Belgorod in Russia and to Poltava in Ukraine.