Global oil prices look set to test the $100 mark this week as the U.S. leads western leaders in mulling sanctions on the sale of Russian crude.
Global oil prices raced towards the $100 per barrel mark for the first time in nearly eight years Tuesday following Russia’s incursion into the Ukraine amid concern for the disruption of natural gas supplies into western Europe and sanctions on crude exports from Moscow.
Russia’s estimated 10.2 million barrels of daily production contributes around a quarter of the total output of OPEC+, the loose alliance of cartel members and their allies, and represents a key component to the global marketplace.
U.S. ambassador to the United Nations Linda Thomas-Greenfield told reporters late Monday that “we can, will, and must stand united in our calls for Russia to withdraw its forces” from the region, adding that “the U.S. will impose sanctions on Russia for this clear violation of international law.”
At the same time, Germany’s Chancellor Olaf Scholz reportedly nixed certification of the Nordstream 2 gas pipeline from Russia, a signal that Europe’s biggest economy is prepared to diversify its energy supplies in the wake of the Russian incursion.
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Any crackdown on Russia crude, however, could exaggerate the imbalance between a surge in post-pandemic demand, OPEC’s reluctance to boost its current output and the dwindling levels of U.S. domestic supplies.
Last week, in fact, the Energy Department said stockpiles at the key delivery hub in Cushing, Oklahoma fell to the lowest levels since September of 2018, even as overall inventories edged modestly higher to 411.51 million barrels.
“Trading above $97, the market is now more focused on ‘when’ and no longer ‘if’ Brent will reach the psychological 100-barrel level,” said Saxo Bank’s Head of Commodity Strategy Ole Hansen.
WTI crude futures for April delivery were marked $2.00 higher on the session at $93.59 per barrel while Brent contract for the same month, the global benchmark, gained $2.62 to trade at $98.01 per barrel in early New York dealing.
The leap in crude prices is providing an early pre-market boost for U.S. drillers, however, with Dow components Chevron Corp (CVX) – Get Chevron Corporation Report rising 1.6% to $135.55 each and Exxon Mobil (XOM) – Get Exxon Mobil Corporation Report gaining 1.7% to trade at $78.70 each.
