Oil prices surged as concerns over supply disruptions after Russia’s invasion of Ukraine and related sanctions outweighed talks of a coordinated global crude stocks release.
U.S. West Texas Intermediate (WTI) April crude futures were up to $105.56 a barrel after hitting its highest level since July 2014.
A Russian armoured column bore down on Ukraine’s capital Kyiv on Tuesday after deadly shelling of civilian areas in its second largest city.
Russia said on Tuesday its forces had cut off the Ukrainian military from the Sea of Azov north of the Black Sea.
Russia’s economic isolation deepened as the world’s biggest shipping firm Maersk on Tuesday said it would halt container movement to and from Russia. Britain meanwhile has banned all ships with any Russian connection from entering its ports.
“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,” Louise Dickson, senior oil market analyst from Rystad Energy, wrote in a note.
Major oil and gas companies, including BP and Shell , have announced plans to exit Russian operations and joint ventures while Total said it would not invest further capital in its Russian operations.
Buyers of Russian oil are facing difficulty over payments and vessel availability due to sanctions with BP cancelling fuel oil loadings from a Russian Black Sea port.
Still, the market mood was helped by the United States and allies discussing a coordinated release of crude stocks to mitigate supply disruption. That release could reach 60 million to 70 million barrels, media outlets reported.
“OPEC will likely stick to its original plan of a monthly 400,000 bpd increase, which will not alleviate fears,” Tamas Varga, analyst at PVM Oil Associates, said.
The Organization of the Petroleum Exporting Countries and other producers – including Russia – will meet on Wednesday.
“The U.S. is coordinating an additional SPR (strategic petroleum reserve) release and today, the IEA’s extraordinary meeting should also address the issue of energy security. These might provide short-term relief,” Varga added.
Members of the International Energy Agency (IEA) began an extraordinary ministerial meeting on Tuesday which could lead to a coordinated oil stocks release to help cool off oil prices.
Meanwhile, Asia’s factories sustained a brisk recovery in February amid signs the coronavirus pandemic was having less of an impact on business, implying an uptick in oil demand.
Russia, which calls its actions in Ukraine a “special operation”, exports some 4 million to 5 million barrels per day of crude oil, and 2 million to 3 million barrels per day of refined products.