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Oil prices have soared in the wake of sanctions on Russia following the country’s invasion of Ukraine. Brent rose above $104 and WTI above $101 on Tuesday as the market digested the full effects of the sanctions. 

Russia is starting a new phase of the campaign, bringing a lot more force to bear and shelling civlian areas. This poses the risk that the West will encounter growing pressure to sanction Russian oil and gas exports, with all that would entail. Centrica said it is urgently seeking to end natural gas supply agreement with Gazprom – self-sanctioning already well underway.  

We should note that rising oil prices are a windfall for the Kremlin and Russia’s terms of trade – the ratio of its export to import prices – is at its highest since oil prices fell in 2014. 

OPEC+ convenes on Wednesday and is seen maintaining the current pace of production increases, sticking to the incremental 400k bpd. 

The cartel’s technical experts lowered their expectations for the daily oil market surplus by 200,000 barrels to 1.1m barrels. Their estimates showed fuel stockpiles in developed nations will be some 62m barrels below the 2015 to 2019 average by the end of 2022, having previously forecast a shortfall of 20m barrels. 

Meanwhile, the IEA said it will release 60m barrels from its reserves, with the US contributing half of the total. This might soothe near-term concerns but is puny if the West does go down the route of halting Russian energy exports. 

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