Oil Prices Soar to $110 Due to Russian Sanctions... Highest in 7 Years

Vehicles are lined up in long queues to refuel at Seoul Mannam Plaza Discount Gas Station, known as one of the cheapest places in Seoul. Photo by Yoon Dong-joo doso7@

[Asia Economy Reporter Song Seung-seop] Since the invasion of Ukraine, oil prices have skyrocketed due to international sanctions imposed on Russia. Major oil refineries around the world have begun to stop purchasing Russian crude oil out of concern for violating sanctions.

According to the industry on the 2nd, Brent crude futures recorded $110.23 per barrel (approximately 122,700 KRW) as of 1:19 PM that day. This is the highest level since July 2014. West Texas Intermediate (WTI) crude futures also surged to $108.41.

Banks also appear to be taking action to reduce risks. Major European banks such as Societe Generale (SG), Credit Suisse, and ING are reportedly refusing to open letters of credit related to the import of Russian crude oil. Typically, crude oil purchases are guaranteed by the purchasing bank opening a letter of credit to ensure payment. If the letter of credit is denied, the method to purchase Russian crude oil practically disappears.

As a result, concerns are growing that energy supply issues could worsen. Daniel Hines, a commodities strategist at Australia and New Zealand Banking Group, told major foreign media, “Oil prices will continue to rise,” adding, “The market is waking up to the reality that there are constraints on the supply of Russian crude oil even without official sanctions.”

Russia, which relies heavily on crude oil sales for a significant part of its economy, is focusing on securing sales. According to major foreign media, Russian exporters have recently discounted their domestic crude oil by about $20 per barrel over the past few days. Nevertheless, there are few buyers, and purchasers are reportedly switching to Middle Eastern crude oil such as from Saudi Arabia. Russia may also increase sales of crude oil to Chinese refineries.

Meanwhile, Russia is the world's largest natural gas exporter and also a major crude oil supplier. Russian oil exports account for about 8% of the global supply. Approximately 5 million barrels of crude oil are exported daily, most of which are sold to Europe.

This content was produced with the assistance of AI translation services.