Oil soars over US$100 as Russia attacks targets across Ukraine
BNN Bloomberg
Oil surged above US$105 a barrel for the first time since 2014 after Russia attacked sites across Ukraine, triggering fears of a disruption to energy exports at a time of already tight supplies.
Brent was up about 6 per cent, paring gains after surging as much 9.2 per cent to US$105.79 a barrel after President Vladimir Putin ordered Russian troops into Ukraine. U.S. benchmark West Texas Intermediate briefly topped US$100 a barrel before easing off of gains. Kyiv called it a “full-scale invasion” and announced martial law, while U.S. President Joe Biden said he would impose “severe sanctions” on Moscow. The White House said Biden will speak about Ukraine at 12:30 p.m. in Washington.
The escalation has spooked a market that was already under stress, as oil supplies around the world fail to keep pace with a vigorous recovery in demand as the coronavirus pandemic recedes. The OPEC+ coalition, led by Russia and Saudi Arabia, is struggling to restore production quickly enough, prompting some of the biggest market players to warn of higher prices.
OPEC+ meets on March 2 to decide on output for April. As of Wednesday, delegates from some of the biggest members were saying that triple-digit oil wouldn’t cause them to pump faster. Their current strategy is to add 400,000 barrels a day of crude to the market each month.
Futures curves are steeply backwardated, a bullish pattern whereby near-term deliveries are more expensive than later ones as physical traders rush to secure supplies. Inventories at the U.S.’s biggest storage hub at Cushing, Oklahoma, fell to the lowest since September 2018 and are at their lowest seaonally in 14 years, according to an Energy Information Administration report.
It’s possible that OPEC increases production if there’s further escalation, according to Carole Nakhle, founder of consultant Crystol Energy.
