- Oil steadied on Friday after topping $100 a barrel as traders questioned the impact of Western sanctions on Russia.
- US President Joe Biden hasn't yet placed penalties on Russia's crucial energy exports.
- Disruption of Russian exports to Europe and the US would likely see Brent crude average $115 a barrel, JPMorgan said.
Oil prices steadied Friday after Russia's energy exports escaped the White House's latest round of sanctions, leaving traders questioning the impact of Western penalties on the market.
Russia is the third-largest oil producer in the world, and is responsible for about 12% of global production.
Brent crude futures rose 1.1% to settle at $96.48 a barrel, after hitting a fresh seven-year high of $105 a barrel. West Texas Intermediate rose 0.7% to $93.52 a barrel, after earlier hitting $100.54 a barrel.
Russia is also the largest provider of natural gas to Europe, so sanctions mean higher gas prices. European natural gas rose almost 70% to over $45 per thousand cubic feet (MCF) on Thursday, which is about ten times the price in the US at around $4.50 MCF, according to broker ICAP.
Higher oil prices are expected to feed into inflation, which will only heighten the need for higher interest rates.
Oil prices in the US and globally were already trading at high ranges in recent months, so President Joe Biden's administration had been asking for more oil supply to cool price pressures. But Russia and Saudi Arabia had rejected Biden's calls to pump more, citing persistent uncertainty.
While that leaves the US in an awkward position, Biden said Thursday he was working on a release of additional oil from strategic crude reserves. There is also hope that a nuclear deal between the US and Iran will take some of the heat out of the market, if it results in an increase in Iranian crude shipments.
Biden has not yet placed sanctions on energy or Russian access to the SWIFT global payment system, which seems to indicate the market is not discounting the likelihood of deeper conflict.
"For oil, we are waiting to see if the US releases more barrels from the Strategic Petroleum Reserve, and we may also see Iranian exports ramp up if an Iranian deal gets done," Gary Stromberg, US high yield energy credit analyst at PGIM Fixed Income, said.
"It is clear to me a geopolitical risk premium of at least $10/bbl will provide support over the near term, however, oil above $100/bbl will impact demand, so we are watching for demand destruction and its impact on longer-term oil prices."
Disruption of Russian exports to Europe and the US would likely see Brent average $115 a barrel in the second quarter this year, JPMorgan strategists said Wednesday. The bank then expects it to fall to $105 in the third quarter and ease further to $95 a barrel by the last quarter.