Oil prices rise as Ukraine conflict raises supply concerns

New Delhi: Oil prices rose on Tuesday on concerns about supply disruptions following Russia’s invasion of Ukraine and related sanctions.

May Brent crude futures were up $4.58, or 4.67%, from $102.55 a barrel by 1331 GMT after hitting an intraday high of $104.60. The benchmark touched a seven-year high of $105.79 since the attack began last week.

US West Texas Intermediate (WTI) April crude futures were up $4.14, or 4.33%, at $99.86 a barrel, having hit their highest level since July 2014 at $101.53.

A Russian armored column broke down in Ukraine’s capital Kyiv on Tuesday after deadly shelling fired into civilian areas in the second-largest city.

Russia said on Tuesday that its forces had cut off Ukrainian forces from the Azov Sea, north of the Black Sea.

Maersk, the world’s largest shipping firm, said on Tuesday that Russia’s economic isolation has deepened and it will stop the movement of containers to and from Russia. Meanwhile, Britain has banned all ships with any Russian connections from entering its ports.

“The fragile situation in Ukraine and financial and energy sanctions against Russia will keep the energy crisis and oil above $100 a barrel in the near term and even higher if the conflict escalates,” said Lewis Dixon, Rystad’s senior oil market analyst. Energy, is written in a note.

Major oil and gas companies, including BP and Shell, have announced plans to exit Russian operations and joint ventures, while Total said it would not invest further capital in its Russian operations.

Russian oil buyers are facing difficulty in payment and vessel availability due to sanctions with BP canceling fuel oil loading from a Russian Black Sea port.

Nevertheless, market mood was helped by discussions by the United States and allies on a coordinated release of crude stocks to mitigate supply disruptions. Media outlets reported that the release could reach 60 million to 70 million barrels.

“OPEC will likely stick to its original plan of 400,000 bpd monthly growth, which will not ease fears,” said Tamas Varga, analyst at PVM Oil Associates.

The Organization of Petroleum Exporting Countries and other producers including Russia will meet on Wednesday.

“The US is coordinating an additional SPR (Strategic Petroleum Reserve) release and today, the extraordinary meeting of the IEA should also address the issue of energy security. These may provide short-term relief,” Varga said.

Members of the International Energy Agency (IEA) launched an extraordinary ministerial meeting on Tuesday over what could be a coordinated oil stock issuance to help cool oil prices.

Meanwhile, factories in Asia recovered sharply in February amid signs that the coronavirus pandemic was having less impact on trade, boosting demand for oil.

Russia, which calls its operations in Ukraine a “special operation”, exports about 4 million to 5 million barrels per day of crude oil and 2 million to 3 million barrels per day of refined products.

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