OIL FUTURES: Crude opens sharply higher Feb. 27 as Ukraine fighting intensifies

Crude oil futures opened substantially higher Feb. 27 as fighting intensified in Ukraine and as the G7 nations and their allies planned to impose stricter sanctions against Russia, including banning Russian banks from using the SWIFT international payment system, which could indirectly impact crude trading.

At 2320 GMT, NYMEX April WTI shot up by $5.39/b to $96.98/b and ICE April Brent gained $4.97/b to $102.90 -- shattering through the $100/b threshold.

NYMEX March RBOB was 6.37 cents higher at $2.7910/gal.

The US and EU announced the planned SWIFT sanctions Feb. 26, and Japan joined in Feb. 27. While the G7 nations and their allies plan to carve out exemptions for energy to avoid major supply disruptions, pressure is mounting to include some energy sanctions. Even if the oil and gas carve-outs remain, SWIFT sanctions could still impact some crude trading and flows.

However, energy sanctions remain on the table, White House press secretary Jen Psaki said Feb. 27, a marked change in tone after senior Biden administration officials have insisted for days they intended to exclude energy trades from any financial restrictions.

In response to the tougher sanctions, Russian President Vladimir Putin ordered nuclear deterrent forces on high alert, further escalating tensions.

Comparing SWIFT to "Gmail for banks," a US senior administration official said one option is to "mark" the messages between banks on energy payments, and exempt those specific payments.

"But the second path is to choose our institution -- choose the institutions that we de-SWIFT wisely," the official said. "So, we know where most of the energy flows occur, through which banks they occur. And if we take that approach, we can simply choose the institutions where most of the energy flows do not occur."

UK Foreign Secretary Liz Truss floated the idea of G7 countries imposing limits on the amount of oil and gas they can import from Russia as part of a widening raft of economic measures and sanctions in response to the invasion of Ukraine.

Ukraine's foreign minister, Dmytro Kuleba, urged Western governments to impose a "full embargo for Russian oil and gas."

Russia's key grade shipped to Europe and the US is medium sour Urals. Although the SWIFT ban does not target oil specifically, trading companies use banks as intermediaries for transactions, letters of credit and clearing services.

"It will likely make many buyers more hesitant to purchase Russian oil," said Rick Joswick, head of Global Oil Analytics at S&P Global Platts Analytics. "That will tend to drive down the price of Russian crude oil even more until it ultimately clears outside of its traditional markets in Europe."