Oil spikes as Russian supply concerns increase amid sanctions

Oil prices surged on Wednesday as supply disruption fears mounted following hefty sanctions on Russian banks amid the intensifying Ukraine conflict, while traders scrambled to seek alternative oil sources in an already tight market.

Brent crude futures rose by more than $8, touching a peak of $113.02 a barrel, the highest since June 2014, before easing to $111.17, up by $6.20 or 5.9% by 0950 GMT.

U.S. West Texas Intermediate (WTI) crude futures also jumped more than $8 a barrel, hitting the highest since August
2013 before losing some steam to trade up $5.86 or 5.7% to
$109.27 a barrel.

“Due to limited diversification options, any disruption to
Russia’s energy exports will result in another energy crisis in
Europe,” said Kaho Yu, principal Asia analyst at risk
consultancy Verisk Maplecroft.

“Although the U.S. has called for a global oil reserve
release, oil prices are likely to remain above $100 unless
significant alternative supplies enter the market.”

Russian oil exports account for around 8% of global supply.

Exxon Mobil on Tuesday said it would exit Russia oil
and gas operations as a result of Moscow’s invasion of Ukraine.
The decision will see the firm pull out of managing large
production facilities on Sakhalin Island in Russia’s Far East.

While Western powers have not imposed sanctions on energy
exports directly, U.S. traders at hubs in New York and the U.S.
Gulf are shunning Russian crude.

U.S. President Joe Biden warned Vladimir Putin that the
Russian leader “has no idea what’s coming” in a State of the
Union speech dominated by Russia’s invasion of Ukraine.

A coordinated release of 60 million barrels of oil by
International Energy Agency member countries agreed on Tuesday
failed to reassure the market, and prices rose after the
announcement.

Meanwhile the Organization of the Petroleum Exporting
Countries, Russia and allies, together known as OPEC+, are due
to meet on Wednesday, where they are expected to stick to plans
to add 4,00,000 barrels per day of supply each month.

In a move likely to exacerbate global supply tightness,
buyers are avoiding oil from the CPC pipeline originating in
Kazakhstan, source of over 1% of the world’s supply, due to
sanctions concerns.