Oil prices hit their highest level in more than seven years on Monday amid fears that a possible Russian invasion of Ukraine could trigger U.S. and European sanctions that would disrupt exports from the world’s top producer in an already tense market.
Brent crude futures were at $95.61 a barrel by 0506 GMT, up $1.17, or 1.2%, after hitting their highest since October 2014 at $96.16. U.S. West Texas Intermediate (WTI) crude was up $1.41, or 1.5%, at $94.51 a barrel, hovering around $94.94, its highest since September 2014.
Global financial markets have been rattled by U.S. comments about an imminent Russian attack on Ukraine.
The United States said on Sunday that Russia could invade Ukraine at any time and could create a surprise pretext for an attack.
“If… a troop movement occurs, Brent won’t have any difficulty rallying above $100,” OANDA analyst Edward Moya said in a note.
“Oil prices will remain extremely volatile and sensitive to incremental updates on the situation in Ukraine.”
Despite monthly pledges by the Organization of the Petroleum Exporting Countries (OPEC) and its allies (OPEC+) to increase output by 400,000 barrels per day (bpd) by March, it has struggled to raise output.
The IEA said the gap between OPEC+ production and its target widened to 900,000 bpd in January, while JPMorgan said the OPEC+ output gap alone was 1.2 million bpd.
JPMorgan analysts said in a Feb. 11 report: “We note signs of stress across the bloc: seven OPEC 10 members failed to achieve quota increases this month, with Iraq seeing the largest shortfall. “
The bank added that a supercycle is in full swing and “oil prices could surge to $125 a barrel as the risk premium for spare capacity widens”.
As the economy rebounds from the worst of the coronavirus pandemic and spare supplies are limited, demand for oil has outpaced production growth, said Tina Teng, an analyst at CMC Markets.
“While global leaders are scrambling to help ease rising tensions, prices will soon soar,” she added.
Investors are also eyeing talks between the U.S. and Iran to revive the 2015 nuclear deal.
However, a senior Iranian security official said on Monday that progress in the talks was becoming “more difficult”.
In the U.S., strong oil prices are encouraging energy companies to boost output as they added the most oil rigs in four years last week, energy services firm Baker Hughes said on Friday.