On Monday, oil prices reached their highest level in more than seven years on fears that a Russian invasion of Ukraine would spark US and European sanctions, disrupting the world’s top producer’s exports in an already tight market.
Brent crude futures were trading at $95.65 a barrel at 0742 GMT, up $1.21, or 1.3 percent, after earlier reaching a record high of $96.16 in October 2014.
US West Texas Intermediate (WTI) crude increased $1.28, or 1.4 percent, to $94.38 a barrel, lingering near a session high of $94.94, the highest level since September 2014.
The United States’ comments about an impending Russian invasion on Ukraine have spooked global financial markets.Russia might invade Ukraine at any time and even invent a pretext for an attack, the US said on Sunday.
“If troop movement occurs, Brent crude would easily rebound above the $100 level,” OANDA analyst Edward Moya wrote in a note.
“Oil prices will continue to be exceedingly volatile and volatile in response to incremental updates on the Ukraine crisis.”
The difficulties arise as the Organization of the Petroleum Exporting Countries (OPEC) and its partners, dubbed OPEC+, struggle to increase output despite monthly agreements to boost output by 400,000 barrels per day (bpd) until March.
While geopolitical concerns contribute to the positive stance, RBC Capital analysts noted that this oil supercycle is fundamentally driven.
“We believe that prices have the potential to reach or flirt with $115/bbl or higher this summer,” analyst Mike Tran wrote in a note.
The International Energy Agency said in January that the difference between OPEC+ output and its objective had increased to 900,000 barrels per day, while JP Morgan estimated the shortfall for OPEC alone at 1.2 million barrels per day.
“We observe signs of pressure across the group: seven OPEC-10 countries failed to fulfill quota increases last month, with Iraq exhibiting the greatest shortfall,” JP Morgan analysts wrote in a Feb. 11 report.
The bank stated that a supercycle is already underway, with “oil prices expected to overshoot to $125 per barrel due to a growing risk premium on spare capacity.”
Investors are also keeping an eye on US-Iran discussions aimed at reviving the 2015 nuclear deal.
Iran’s foreign ministry spokesman stated during a news conference in Tehran on Monday that the discussions have not reached a stalemate, despite earlier remarks by a top Iranian security official that progress was becoming “more difficult.”
In the United States, high oil prices are pushing energy companies to expand production, as they added the most oil rigs in four years.
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