SINGAPORE (Parliament Politics Magazine) – Oil prices rose to the highest level ever in over seven years on Monday, owing to fears that an invasion of Russia in Ukraine may prompt US and European sanctions, disrupting exports from the world’s top producer in a market that is already tight.
Brent crude futures were up $1.17, or 1.2 percent, at $95.61 a barrel by 0506 GMT, after touching a high of $96.16, the most since October 2014. WTI crude inched up $1.41, or 1.5 percent, to $94.51 a barrel, holding near a session high of $94.94, the highest since September 2014.
The US’ comments about a possible Russian strike on Ukraine have caused the financial markets of the world to tremble.
The US warned on Sunday that there was a possibility of Russia invading Ukraine at any time and even inventing a justification for an attack.
“If troop movement happens, Edward Moya, OANDA analyst, wrote in a note, Brent crude won’t have any trouble rallying above the $100 level,”
“Oil prices will remain exceedingly volatile and susceptible to minor changes in the Ukraine crisis.”
The tensions arise as OPEC and its partners, known as OPEC+, struggle to increase output even after the monthly agreements to increase output by 400,000 barrels a day (bpd) until the month of March.
The difference between output by OPEC+ and its objective grew to 900,000 bpd in January, according to the International Energy Agency, while JP Morgan estimated the deficit for OPEC alone to be 1.2 million bpd.
In a Feb. 11 report, JP Morgan analysts noted, signs were seen of pressure across the group: seven countries of OPEC-10 failed to fulfil quota rises in the month, with Iraq exhibiting the greatest shortfall.
A super-cycle is underway, according to the bank, with oil prices projected to rise at a pace to $125 a barrel on growing spare capacity risk premium.
As nations recover from the worst of the COVID pandemic, Tina Teng, CMC Markets analyst, said surplus supply is low and demand for oil has outrun the growth of production.
Though world leaders are rushing to assist alleviate the mounting tension, she noted, “it would not take long for prices to surge higher.”
Investors are also keeping an eye on discussions between Iran and the US to resurrect the 2015 nuclear deal.
On Monday, however, a top official of Iranian security stated that progress in the discussions is getting “more difficult.”
In the US, high oil prices are pushing energy companies to increase output, as in the last four years the most oil rigs were added by them, according to Baker Hughes Co., an energy services company.
