An oil worker looks on during the filling of an oil tanker at a shipment and storage terminal in Jose, Venezuela. File photo: REUTERS/JORGE SILVA
An oil worker looks on during the filling of an oil tanker at a shipment and storage terminal in Jose, Venezuela. File photo: REUTERS/JORGE SILVA

London — Brent oil jumped above $100 a barrel for the first time since 2014 on Thursday after Russia attacked Ukraine, worsening concerns about disruptions to global energy supplies.

Brent crude rose $7.07, or 7.3%, to $103.91 a barrel at 9.44am GMT, and West Texas Intermediate crude jumped $6.43, or 7%, to $98.53/bbl. The two benchmarks reached their highest levels since August and July 2014, respectively.

“Russia is the third-largest oil producer, and second-largest oil exporter. Given low inventories and dwindling spare capacity, the oil market cannot afford large supply disruptions,” UBS analyst Giovanni Staunovo said. “Supply concerns may also spur oil stockpiling activity, which supports prices.”

Russia is also the largest provider of natural gas to Europe, providing about 35% of its supply.

“It's not just geopolitical risk that is the problem but the further straining of supply,” OCBC Bank economist Howie Lee said. “Russian oil supply will disappear overnight if faced with sanctions ... and Opec can’t produce fast enough to cover this gaping hole.”

Global oil supplies remain tight as demand recovers from pandemic lows.

Underscoring the tight market, premiums on crude contracts for loading in one month over contracts for loadings in six months, a metric closely watched by traders, hit a record high $11.55 a barrel.

“This growing uncertainty during a time when the oil market is already tight does leave it vulnerable, and so prices are likely to remain volatile and elevated,” said Warren Patterson, head of ING’s commodity research.

Analysts believe Brent is likely to remain above $100 a barrel until significant alternative supplies become available, for example from Opec, US shale, or Iran.

The US and Iran have been engaged in indirect nuclear talks in Vienna that could lead to the removal of sanctions on Iranian oil sales.

Ali Shamkhani, Iran’s top security official, tweeted on Thursday that it is possible to achieve a good nuclear agreement with Western powers due to significant progress made in negotiations.

Analysts are warning of inflationary pressure on the global economy from $100 oil, especially for Asia, which imports most of its energy needs.

“Asia’s achilles heel remains its vast import needs for energy, with surging oil prices bound to take a hefty bite out of income and growth over the coming year,” HSBC economist Frederic Neumann said.

Reuters

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