Increasing concerns about Russia attacking Ukraine yesterday sent oil prices to their highest level in over seven years.
The price of Brent crude increased by 55 cents to $94.99 a barrel after hitting its highest level since October 2014 at $96.16.
U.S. West Texas Intermediate (WTI) crude oil prices climbed 85 cents to $93.95 a barrel, exceeding the $94.94 peak of September 2014.
Global financial markets have been rattled by the comments made by the United States about an upcoming attack by Russia on Ukraine.
The United States said on Sunday that Russia might launch an attack at any time, even under a pretext of a surprise invasion. Russian troops have amassed near the Ukrainian border, though Moscow denies any intentions of invading the country and has accused the West of hysteria.
A brief cooling of the oil market followed statements by Ukrainian Ambassador Vadym Prystaiko that Ukraine was prepared to compromise with Russia. Prices have since resumed their upward trajectory.
“Despite the fact that we’ve had talks of more negotiations, the market is not quite convinced that conflict between Russia and Ukraine is off the table,” said Phil Flynn, analyst at Price Futures Group.
Rystad Energy’s Nishant Bhushan, a senior market analyst for oil, stated that Russia has a capacity of around 11.2 million barrels daily, one of the world’s largest crude oil producers.
“Any disruption of oil flows from the region would send Brent and WTI prices skyrocketing higher far above $100, in a market struggling to supply the increased demand for crude as economies recover from the pandemic,” Bhushan said.
OPEC and its allies, known collectively as OPEC+, have faced difficulties delivering on monthly commitments to increase output by 400,000 barrels per day (bpd) until March.
International Energy Agency (IEA) chief Fatih Birol urged OPEC+ to close the gap between words and its actions.
There has been a widening gap between the OPEC+ target and actual production, according to the IEA.
U.S.-Iran talks are also being watched by investors. Iran’s foreign minister said the country was eager to reach a swift agreement with the Russians in Vienna, provided its national interests were protected.
“A nuclear deal between the United States and Iran could release 1.3 million barrels of supply, but this will not be sufficient to ease supply constraints,” noted Pratibha Thaker, the Economist Intelligence Unit’s editorial director for the Middle East and Africa.
