Oil Surges to 14-Year High Near $140

Date: 07 March 2022 - 22:08

News ID: ۱۰۰۷۷۵

LONDON (Reuters) -- Oil prices spiked to their highest levels since 2008 on Monday amid market supply fears as the United States and European allies considered banning Russian oil imports and prospects for a swift return of Iranian crude to global markets receded.
In the first few minutes of trade Brent crude reached $139.13 a barrel and U.S. West Texas Intermediate (WTI) hit $130.50, both benchmarks striking their highest since July 2008.
By 1204 GMT, prices had eased back, with Brent up 6.3 percent at $125.55 per and WTI up 6.7 percent at $123.37.
Global oil prices have spiked more than 60 percent since the start of 2022, along with other commodities, raising concerns about world economic growth and stagflation. China, the world’s No. 2 economy, is already targeting slower growth of 5.5 percent this year.
U.S. Secretary of State Antony Blinken said on Sunday said the United States and European allies were exploring banning imports of Russian oil, while the White House was coordinating with Congressional committees to move forward with a U.S. ban.
“We consider $125 per barrel, our near-term forecast for Brent crude oil, as a soft cap for prices, although prices could rise even higher should disruptions worsen or continue for a longer period,” UBS commodity analyst Giovanni Staunovo said.
A prolonged war could see Brent moving above the $150 per barrel mark, he said.
Analysts at Bank of America said if most of Russia’s oil exports were cut off, there could be a 5 million barrel per day (bpd) or larger shortfall, pushing prices as high as $200.
JP Morgan analysts said oil could soar to $185 this year, and analysts at Mitsubishi UFJ Financial Group

Inc (MUFG) said oil may rise to $180 and cause a global recession.

Russia is the world’s top exporter of crude and oil products combined, with exports at around 7 million bpd, or 7 percent of global supply. Some volumes of Kazakhstan’s oil exports from Russian ports have also faced complications.

The head of Japan’s largest business lobby said the country’s imports of Russian crude could not be replaced immediately. Russia is Japan’s fifth-biggest supplier of crude oil and liquefied natural gas (LNG).

Meanwhile, talks to revive Iran’s 2015 nuclear deal were mired in uncertainty after Russia demanded a U.S. guarantee that sanctions it faces over the Ukraine conflict would not hurt its trade with Tehran. China also raised new demands, sources said.

France told Russia on Monday not to resort to blackmail over efforts to revive the nuclear deal, while Iran’s top security official said the outlook for the talks “remains unclear.”

“Iran was the only real bearish factor hanging over the market but if now the Iranian deal gets delayed, we could get to tank bottoms a lot quicker especially if Russian barrels remain off the market for long,” said Amrita Sen, co-founder of Energy Aspects, a think tank.

Separately, U.S. and Venezuelan officials discussed the possibility of easing oil sanctions on Venezuela but made scant progress toward a deal in their first high-level bilateral talks in years, five sources familiar with the matter said, as Washington seeks to separate Russia from one of its key allies.

Elsewhere Monday, world stock markets also tumbled as European gas prices struck record peaks on energy supply fears.

Frankfurt and Paris led the losses in Europe with drops of more than three percent in midday deals after Hong Kong closed down almost four percent, extending last week’s sharp drops for global equities.

Commodities have been red hot since Russia’s offensive in Ukraine, with gold on Monday back above $2,000 an ounce thanks to the metal’s status as a haven investment.

Aluminium, copper and palladium prices kicked off the week with record highs and nickel rocketed by more than 25 percent in value.

The surge in prices is handing a headache to central banks, which have already begun removing pandemic-era cash stimulus and are raising interest rates to bring down inflation that stood at the highest levels in decades even before the invasion.

“The current backdrop is also stoking stagflation concerns, with rising inflationary pressure unlikely to be offset by sufficient global economic growth to prevent a stagnant environment,” said Richard Hunter, head of markets at Interactive Investor.

The International Monetary Fund warned at the weekend that the war and sanctions on Russia would have a “severe impact” on the global economy.

In foreign exchange Monday, the euro sank to the lowest level for almost two years against the dollar, pummeled by fears of sanctions on Russian energy that would hit the eurozone’s economic recovery, traders said.

The euro slid 1.1 percent to $1.0806, while the ruble hit a record-low 142.18 against the dollar.

“There are fears we are heading for a period of stagflation in the eurozone given the energy crunch and the region’s exposure to Russia,” ThinkMarkets analyst Fawad Razaqzada told AFP.

He added the greenback was well supported thanks to investors seeking safety as stock markets slump.