The Brent oil traded at $103 per barrel in the commodity market today as Russia attacks Ukraine. This incidence has exacerbated concerns of a war in Europe, hence, the occurrence of a potential disruption in the global energy value chain.
The Ukraine’s Foreign Minister, Dmytro Kuleba mentioned in his tweet Russia had launched a full-scale attack of Ukraine with major targets at cities using weapon strikes. The Russian President, Vladimir Putin has also authorized the operation of a special military in Ukraine.
The Brent crude oil is currently trading at $103.08 per barrel, having commenced trading today at $98.82 per barrel. This is the highest it has traded for since September 2014. However, for the West Texas Intermediate (WTI) crude oil, it is currently trading at $97.61, after rising to as much as $97.40, the highest it has traded since August 2014.
IMPORTANT THINGS TO KNOW
- Oil prices have surged more than $20 per barrel since the start of 2022 with the panic that the United States and Europe might cause a disruption in the global oil supplies by imposing regulations that will leave the Russian energy sector incapacitated, knowing that Russia is the second largest oil producer.
- Also, Russia is the largest supplier of natural gas to the Europe and its oil caters to most of the European refineries.
The head of ING’s commodity research, Warren Patterson, gave his view on the Russian-Ukraine tiff, as he stated that “Russia’s announcement of a special military operation into Ukraine has pushed the Brent oil price to $103/barrel mark. This growing uncertainty during a time the oil market is already tight does leave it vulnerable, and so prices are likely to remain volatile and elevated.”
Furthermore, on Tuesday, 22nd February, 2022, the Western nations and Japan sanctioned Russia for ordering troops into the separatist regions of eastern Ukraine and further acclaimed to intensify the threat if Moscow launched the attack of its neighbor. Yet, these countries have been very cautious imposing sanctions that could affect the energy trade.
The OCBC economist, Howie Lee said that “it’s not just the 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.”
Therefore, some members of the Organization of Petroleum Exporting Countries (OPEC) and its associates (OPEC+) have stated that increasing the output further will be unnecessary as a potential deal between Iran and the world powers will do so.
Nonetheless, Japan and Australia mentioned earlier today that they were primed to tap their oil reserves, together with other International Energy Agency (IEA) member countries, if global supplies were hit by conflicts. Analysts have thereby warned against the inflationary pressures on the global economy associated with this Brent Oil price hike, especially for Asia, which imports most of its energy needs.