SINGAPORE: Oil prices soared more than 9% on Monday, hitting their highest level since 2008.
Oil prices rose as the United States and its European allies mull an import ban on Russian oil and delays in the potential return of Iranian crude to world markets fueled fears of a tightening ‘offer.
Brent crude futures jumped $12.61, or 10.6%, to $130.72 a barrel at 0449 GMT, while US West Texas Intermediate crude, WTI, climbed 10, $41, or 9%, to $126.09.
In the first few minutes of trading Monday, both benchmarks climbed more than $10 a barrel to their highest level since July 2008 with Brent at $139.13 and WTI at $130.50.
Monday’s intraday highs are close to record highs seen for both contracts in July 2008 when Brent hit $147.50 a barrel and WTI touched $147.27.
The United States and its European allies are considering banning Russian oil imports, Blinken said Sunday, and the White House has been coordinating with key congressional committees to move forward with their own ban.
“A boycott would put enormous pressure on oil and gas supply which has already felt the impact of increased demand,” analysts at CMC Markets said.
“Prices are likely to rise in the near term, with a move towards $150 a barrel not out of the question.”
“Such a move will put additional pressure on global economies, pushing inflation higher, leaving central banks to debate how quickly rate hikes should be implemented.”
Global oil prices have climbed 67% since the start of 2022, along with other commodities, raising concerns about global economic growth and stagflation. China, the world’s second largest economy, is already aiming for slower growth of 5.5% this year.
Fuel prices topped 2008 records with US gasoline at a high of $3,890 per gallon and fuel oil futures at $4,237 per gallon.
Bank of America analysts have said that if most of Russia’s oil exports were cut off, there could be a shortfall of 5 million barrels or more, meaning oil prices could double by 100 to 200. dollars a barrel, while JP Morgan analysts said this week that oil could rise to $185 a barrel this year.
“If the supply tension does not ease, oil could rise above its all-time high,” said Howie Lee, an economist at Singapore’s OCBC Bank.
“In the worst-case scenario of a full sanction on energy exports from Russia, I wouldn’t be surprised to see Brent trading above $200,” he added.
Russia is the world’s largest exporter of crude oil and petroleum products combined, with exports of around 7 million bpd, or 7% of global supply. Some volumes of Kazakhstan’s oil exports from Russian ports have also faced complications.
Despite soaring oil prices, U.S. energy companies reduced the number of oil rigs in operation last week, underscoring supply issues. In Libya, the closure of the El Feel and Sharara oil fields resulted in the loss of 330,000 barrels per day (bpd), the National Oil Corporation announced on Sunday, or more than 25% of its production in 2021.
Talks to revive the 2015 nuclear deal between Iran and world powers were mired in uncertainty on Sunday after Russia’s demands for a US guarantee that the sanctions it faces over the Ukraine conflict will not harm not to its trade with Tehran. China has also raised new demands, sources say.
In response to Russia’s demands, US Secretary of State Antony Blinken said on Sunday that sanctions imposed on Russia for its invasion of Ukraine had nothing to do with a possible nuclear deal with Iran.
“Iran was the only real bearish factor weighing on the market, but if now the Iran deal is delayed, we could hit bottom much faster, especially if Russian barrels stay out of the market for a long time,” he said. Amrita Sen, co-founder of Energy Aspects, a think tank.
Eurasia Group said further Russian demands could disrupt nuclear talks, although it still kept the odds of a 70% deal.
Iran will take several months to restore oil flows even if it reaches a nuclear deal, analysts have said.
Separately, U.S. and Venezuelan officials discussed the possibility of easing oil sanctions against Venezuela, but made little progress toward an agreement in their first high-level bilateral talks in years, five sources close to the government said. file, while Washington seeks to separate Russia from one of its main allies.