Brent oil hits $100 per barrel as Russia, Ukraine tension escalates

Brent oil traded at $100 per barrel in the Asian session today on news of Russia attacking Ukraine, which has, in turn, exacerbated concerns that a war in Europe could disrupt global energy supplies.

Russian President Vladimir Putin authorized a special military operation in Ukraine. Ukraine’s Foreign Minister, Dmytro Kuleba said in a tweet that Russia had launched a full-scale invasion of Ukraine and was targeting cities with weapons strikes.

The global benchmark, the Brent crude, hit a high of $102.48 a barrel, its highest since September 2014. It is however currently trading $98.82 a barrel, up 5.11%.

The United States’ benchmark, the West Texas Intermediate (WTI) crude futures is up 5.26%, currently $96.94 a barrel, after rising to as much as $97.40, the highest since August 2014.

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Oil prices have surged more than $20 a barrel since the start of 2022 on fears that the United States and Europe would impose sanctions on Russia’s energy sector which will in turn disrupt oil supplies, being that Russia is the second largest oil producer.

As previously mentioned, Russia is the world’s second-largest oil producer, and its oil caters to most of the European refineries. The country is also the largest supplier of natural gas to Europe, providing about 35% of the supply.

Western nations and Japan on Tuesday punished Russia with new sanctions for ordering troops into separatist regions of eastern Ukraine and threatened to go further if Moscow launched an all-out invasion of its neighbor. However, these countries have been careful to not impose sanctions on energy trade.

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

Some members of the Organization of Petroleum Exporting Countries and its allies (OPEC+) said there is no need for the group and its allies to increase output further as a potential deal between Iran and world powers will increase supplies. Some OPEC members are already struggling to meet current targets.

Japan and Australia said today that they were prepared to tap their oil reserves, together with other International Energy Agency (IEA) member countries, if global supplies were hit by hostilities in Ukraine. Analysts are also warning of inflationary pressure on the global economy from $100 oil, especially for Asia, which imports most of its energy needs.