LONDON- Oil hit its highest since 2014 on Tuesday as tensions between Russia and Ukraine escalated after Moscow ordered troops into two breakaway regions in eastern Ukraine, adding to supply concerns that are pushing prices to near $100 a barrel.
The United States and its European allies are poised to announce new sanctions against Russia after President Vladimir Putin formally recognised the two regions in eastern Ukraine, escalating a security crisis on the continent.
“The potential for a rally over $100 a barrel has received an enormous boost,” said Tamas Varga of oil broker PVM. “Those who have bet on such a move anticipated the escalation of the conflict.”
Brent crude futures rose $2.10, or 2.2 percent, to $97.49 a barrel, adding to a 2 percent gain on Monday. Earlier on Tuesday it hit $97.66, its highest since Sept. 2014.
US West Texas Intermediate (WTI) crude futures jumped $3.25, or 3.6 percent, to $94.32 a barrel versus Friday’s settlement. The US market was closed on Monday for a public holiday.
Responding to the Russian troop movements after Moscow recognized two breakaway regions as independent, Ukrainian President VolodymirZelensky accused Russia of violating Ukraine’s sovereign territory, in an address to the nation early on Tuesday.
He said his country wanted a diplomatic solution to the crisis but was ready to dig in for the long haul.
Analysts say the big question hanging over the oil market is whether Russian energy exports would actually be disrupted if Moscow went ahead with a fullscale invasion of Ukraine and western governments imposed sanctions against Russian financial institutions.
“There’s a lot of uncertainty,” Westpac senior economist Justin Smirk said. “Will Russia be willing to supply on credit?”
Meanwhile, OPEC+ compliance with oil output cuts rose to 129 percent in January, a source from the group told Reuters, as producers fell further behind their target and signaling a tight market that could push prices higher.
OPEC+, which groups the Organization of the Petroleum Exporting Countries and others including Russia, is undoing output cuts put in place after the pandemic slashed demand.
The group has aimed to restore an additional 400,000 barrels per day (bpd) each month since August, but not all producers have kept up with their individual targets.
West African producers Nigeria and Angola, for example, have faced outages and struggled with limited investment. – Reuters