Traders' concerns about potential disruptions in Russia's energy sector cause oil prices to rise.

• On Monday, oil prices increased due to concerns about potential disruptions to Russia's oil and gas exports.
• On Saturday evening, Russia faced new sanctions imposed by the U.S. and its Western allies, specifically targeting its financial system.
• Russian petroleum sales are severely hindered by the numerous banking sanctions, according to John Kilduff, a partner at Again Capital.

On Monday, oil prices increased due to concerns that sanctions on Russian banks may indirectly affect energy supplies.

The international oil benchmark, Brent, increased by up to 7% to reach a high of $105 per barrel. Additionally, the U.S. benchmark, West Texas Intermediate (WTI), also experienced a gain of more than 7% to trade above $99 per barrel.

The day ended with WTI up 4.5% at $95.72 per barrel and Brent up 2.7% at $100.55.

On Thursday, both contracts surpassed $100 for the first time since 2014 due to Russia's invasion of Ukraine. Nevertheless, the increase was brief as WTI and Brent declined during Thursday's session and into Friday's trading following the White House's initial round of sanctions that did not target Russia's energy sector.

Over the weekend, there was a "remarkable escalation across the board," which put a risk premium back into prices, according to Bob McNally, president of Rapidan Energy Group. At that time, traders believed the market had recovered from a potential major interruption in supply.

The removal of some Russian banks from the global interbank messaging system Society for Worldwide Interbank Financial Telecommunication (SWIFT), the imposition of measures on Russia's central bank that prevents it from deploying its reserves, and Russian President Vladimir Putin placing his nuclear deterrence forces on high alert were all pointed to by him.

He stated on CNBC's "Street Signs Asia" on Monday that we might reach either $110 or $115 per barrel before retracing.

New measures announced

On Saturday, the U.S., European allies, and Canada announced their decision to disconnect certain Russian banks from SWIFT.

The global powers declared in a joint statement that disconnecting these banks from the international financial system would hinder their global operations, as a retaliatory measure.

Experts predict that the latest round of sanctions will have significant ripple effects on Russia's status as a key oil and gas supplier, particularly to Europe.

Russian petroleum sales are currently hindered by the numerous banking sanctions, as stated by John Kilduff, a partner at Again Capital. Banks are reluctant to provide even basic financing, owing to the potential violation of sanctions.

Putin could choose to respond to the U.S. and allies' actions by weaponizing energy and shutting off the supply.

RBC believes that many Western companies may decide not to continue doing business with Russia due to the uncertainty about enforcement and the potential for future coercive action, according to a note sent to clients on Sunday.

OPEC meeting

This week, OPEC and its oil-producing allies, including Russia, will gather to decide on their production policy for April. The oil alliance has been gradually increasing output by 400,000 barrels per day each month since implementing nearly 10 million barrels per day of historic production cuts in April 2020 due to the pandemic.

The group and international oil producers, including the U.S., have kept oil supply under control as demand increased. As a result, oil prices have been steadily rising, with Russia's invasion serving as the catalyst that pushed crude above $100.

Americans are facing higher gas prices due to the impacts of the situation, with the national average for a gallon of gas being $3.60 on Sunday, as per AAA data. The White House is working to ease the burden for consumers.

Despite the ongoing efforts to prevent energy price spikes through the creation of sanctions, Evercore ISI predicts that an overly aggressive but not maximalist approach may not be sustainable in the long run, as disruptions to oil and gas shipments are becoming increasingly likely.

The firm stated that the biggest potential negative from Russia's shadow on the US economy is a surge in oil prices.