Brent crude oil prices hit $96 per barrel Monday, its highest since October 2014. In addition, West Texas Intermediate (WTI) crude nearly breached the $95 mark. Fears of a possible invasion by Russia of Ukraine are stoking fears of disruption in oil supplies worldwide.
Prices of WTI and Brent Crude Reach Eight-Year Highs
Prices of WTI and Brent crude hit their highest rates during the last eight years. Traders feared that a Russian invasion of Ukraine would lead to the heavy US and European sanctions. In turn, these sanctions can further disrupt the supply of crude oil in an already strained market.
On Monday, Brent crude futures hit a peak of $96.16 before settling lower at $95.96 a barrel. This is its highest rate since October 2014. Meanwhile, West Texas Intermediate crude also rose 1.4% or $1.28 to hit $94.38 a barrel. Earlier WTI hit a session high of $94.94, its highest since September 2014.
US Fears of Russia’s Imminent Attack on Ukraine Stoking Fears
Comments from the United States about an imminent attack by Russia on Ukraine have rattled global financial markets. The United States said on Sunday that Russia can invade Ukraine at any time now. In justifying its actions, Russia might create a surprise pretext for an attack. As a result, the US reaffirmed its pledge to defend “every inch” of NATO territory.
Meanwhile, Russian troops massed on the Ukraine border now number more than 100,000. Ukraine is not a member of the North Atlantic Treaty Organization. However, the US reiterated that it supports Ukraine’s right to join the group. On the other hand, Russia dismissed the US’s warning about the country’s invasion plans. The country repeatedly accused the West of “hysteria” in stoking the flames.
Oil Prices To Surge Depending On Ukraine SItuation
OANDA analyst Edward Moya issued a note saying that consumers should brace themselves. Moya said that if Russian military activity escalates, Brent crude won’t have problems hitting above $100 per barrel. “Oil prices will remain extremely volatile and sensitive to incremental updates regarding the Ukraine situation,” he added.
Meanwhile, pressure mounts for the Organization of Petroleum Exporting Countries (OPEC) to increase its Brent crude output. Including allis that help makeup OPEC+, these countries are having trouble fulfilling their pledge to ramp up production. Last year, the oil group committed to increasing its output by 400,000 barrels per day until March.
OPEC+ Output Gaps
The International Energy Agency said that the coalition’s gap is now 900,000 BPD in January. For OPEC member countries alone, the gap widened at 1.2 million barrels. In addition, JPMorgan analysts issued a February 11 note saying that OPEC isn’t moving the needle much. “We note signs of strain across the group: seven members of OPEC-10 failed to meet quota increases in the month,” they wrote. The bank said that Iraq is the top OPEC member with the largest shortfall. In addition, JPMorgan said that a super-cycle remains in full swing. It warned that due to widening spare capacity risk, oil prices are likely to “overshoot to $125 a barrel.”
Meanwhile, investors remain optimistic that talks between the United States and Iran will resume. The two countries are looking at ways to revive their 2015 nuclear deal. However, a senior Iranian security official said that progress remains difficult to achieve at this time.
US Ramping Efforts To Increase Oil Production
The US, concerned over rising crude oil prices, is now seeing its local industry making efforts to increase production. Energy firms are now adding the most oil rigs and installations over the last four years. This is according to data from energy services company Baker Hughes Co. Damages to the Gulf brought about by Hurricane Ida last year slowed down US oil output.
Do you think that Brent crude oil prices will hit $100 per barrel this year? If yes, what does this mean for the US economy?
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