Oil prices surge on Ukraine invasion

BEIJING, RAW – Oil prices have jumped nearly 3 per cent as Russia’s invasion of Ukraine stoked global supply concerns as markets brace for the potential impact of trade sanctions on major crude exporter Russia.

Global benchmark Brent crude rose $2.72, or 2.75 per cent, to $101.80 a barrel around 0347 GMT on Friday, after climbing to as high as $101.87.

US West Texas Intermediate (WTI) crude touched a high of $95.64, and was last up $2.70, or 2.9 per cent, to $95.51 a barrel.

The attack on Ukraine caused prices to surge to more than $100 a barrel for the first time since 2014 on Thursday, with Brent touching $105, before paring gains by the close of trade.

The massed Russian assault by land, sea and air was the biggest attack on a European state since World War Two, prompting tens of thousands of people to flee their homes.

“Asian buyers, clearly nervous into the weekend, have piled into oil today sending prices higher once again, helped along by reports of explosions in Kyiv,” said Jeffrey Halley, senior market analyst at OANDA.

“The Ukraine situation will serve to keep prices elevated, as will the threat of disruptions, real or imagined, coming in an environment of already strong demand and constrained supply globally… I believe Brent crude will now trade in a $90-110 range over the next few weeks.”

In response to the invasion, US President Joe Biden hit Russia with a wave of sanctions on Thursday, measures that impede Russia’s ability to do business in major currencies along with sanctions against banks and state-owned enterprises.

Britain, Japan, Canada, Australia and the European Union also unveiled more sanctions on Moscow, including a move by Germany to halt an $11 billion gas pipeline from Russia.

A US official has said that its sanctions “are not targeting and will not target oil and gas flows”, but oil prices remain elevated.

“Oil markets are particularly vulnerable to supply shocks given global oil stockpiles are at seven-year lows,” said Commonwealth Bank analyst Vivek Dhar in a note.

“OPEC+ spare oil capacity has come under question due to disappointing OPEC+ supply growth,” Dhar wrote, referring to the Organisation of the Petroleum Exporting Countries (OPEC) and allied producers – including Russia – and problems they have experienced in boosting production. Output by OPEC members in January was below a rise planned under a deal with allies, according to a Reuters survey.

While the Biden administration has indicated it may look to release strategic oil stockpiles to address high prices, “history suggests that any drawdown on strategic oil stockpiles will likely only provide temporary relief from high oil prices,” added Dhar.

Nigeria’s petroleum minister has also said that there is no need for OPEC+ to expand planned oil production as a potential deal between Iran and world powers will increase supplies.

The US and Iran have been engaged in indirect nuclear talks in Vienna, in which a deal could lead to the removal of sanctions on Iranian oil sales and increase global supply.

Iranian officials said on Twitter on Thursday that Western partners in the nuclear talks have to make decisions on crucial issues to help reach an agreement.