Both major oil benchmarks surged today, amid escalating supply worries, with Russia’s ramped-up invasion of Ukraine outweighing talks of a coordinated global crude stocks release.
Brent Crude prices soared 8.01 per cent to $106.01 per barrel, while WTI Crude rose 8.85 per cent to $104.19 – well above the seven year highs it recorded last week when prices initially breached the $100 milestone.
The West has imposed heavy sanctions on Russian financial institutions, including the country’s central bank.
While it has stopped short of measures that would restrict energy trading, multiple oil and gas giants have announced exit plans from the country.
BP, Shell and Equinor are ditching their Russian operations and joint ventures, while Total revealed it would not invest further capital in the country.
However, it has kept hold of its 19.4 per cent stake in Novatek.
The country’s economic isolation deepened further as the world’s biggest shipping firm Maersk announced it would halt container movement to and from Russia.
The UK has also banned all ships with any Russian connection from entering British ports.
Buyers of Russian oil have reported difficulties over payments and vessel availability due to sanctions, with BP cancelling fuel oil loadings from a Russian Black Sea port.
Louise Dickson, senior oil market analyst from Rystad Energy, said: “The fragile situation in Ukraine and financial and energy sanctions against Russia will keep the energy crisis stoked and oil well above $100 per barrel in the near-term and even higher if the conflict escalates further,”
The crisis has exacerbated already tight conditions with OPEC+ failing to meet its raised output targets since the start of the year.
At a meeting today, the organisation committed to established plans to increase output by 400,000 barrels per day (bpd) this month as it unwinds cuts from the pandemic amid rebounding demand.
However, multiple members have persistently missed increased production quotas, while the group has also revised down its oil market surplus forecast for this year by about 200,000 bpd to 1.1m bpd under its base scenario.
Meanwhile, the International Energy Agency (IEA) is set to hold an extraordinary ministerial meeting later today to discuss what role its members can play in stabilising the oil market.
The West is now mulling over a co-ordinated release to flood the market and drive down prices, with US President Joe Biden desperate to cut down the cost of living ahead of the mid-terms in November.
The release could reach 60-70m barrels in an attempt to mitigate future disruption to the markets.
Commerzbank analyst Carsten Fritsch explained: “The talk is of 60m barrels, half of which would be provided by the US and the other half by other key oil consumer countries. This time, the EU also intends to participate – when oil reserves were released on a similar scale in the autumn it had not been involved. This release had largely evaporated on the markets. It remains to be seen whether things will be different this time, as the intended amount would only be enough to cover an outage of Russian oil shipments for roughly 13 days.”