Oil prices peaked this Thursday with Brent crude futures reaching $105 per barrel for the first time since 2014 after Russia’s attack on Ukraine sparked further concerns over disruptions in global energy supplies.
Firstly, on Wednesday night, Russia launched an invasion of Ukraine by land, air, and sea. This attack is the biggest from one country to another in Europe since World War II. Western powers, along with the US have promised the toughest sanctions on Russia as a response.
Moreover, this morning, NATO Secretary-General Jens Stoltenberg announced the display of troops by NATO countries like Bulgaria, the Czech Republic, Estonia, Latvia, Lithuania, Poland, Romania, and Slovakia.
At the same time, Lithuania declared a state of emergency in a decree signed by President Gitanas Nauseda in response to Russia’s attack. The Baltic country’s parliament was expected to approve the measure in an extraordinary session later today.
On the other hand, at the end of the session, Brent crude settled at $103.84 a barrel by 11:39 a.m., after touching the $105 peak. The US West Texas Intermediate jumped $4.95, or 5.4%, to $97.05 a barrel, after earlier rising to $100.54.
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Oil prices to remain above $100 per barrel
UBS analyst Giovanni Staunovo said to Reuters about the matter. “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.” He also added. “Supply concerns may also spur oil stockpiling activity, which supports prices.”
The Russian conflict comes at a time when the market keeps struggling with tight supplies. On the one hand, global supplies remain tight after the pandemic, on the other, the lack of gas in Europe has lead to a switch from gas to oil in electricity production and manufacture. That sudden change in demand has jumped prices and tightened supplies.
In addition, analysts consider then oil prices will remain above $100 a barrel until significant alternative supplies become available. These supplies could come from Iran. The US and Iran have been engaged in direct talks to revive the 2015 Nuclear Deal that could lead to the removal of sanctions on Iranian oil.
Finally, with the conflict escalating in Ukraine, western powers may finally agree with Iran to make significant progress in negotiations. Still, analysts are warning of inflationary pressure on the global economy from $100 oil, especially for Asia, which imports most of its energy needs.