Brent oil price hit a high of over $107.5 per barrel on Tuesday, for the first time since June 2014, while WTI climbed to almost $108 per barrel, amid fears that the war between Russia and Ukraine would disrupt global oil and natural gas supplies. WTI is trading in an uptrend, but in case the uptrend is reversed, support may be found near $88.5 per barrel and further down around $82.4 per barrel.
Oil prices were buoyed by the announcement of heavy sanctions against Russia. Even though western sanctions avoided targeting the sensitive energy sector as much as possible, there are increasing fears that the war would disrupt the distribution of oil. Russia is the world’s second-largest oil exporter after Saudi Arabia, shipping around 5 million barrels of crude oil per day, approximately half of which goes to the Eurozone. A disruption in the distribution of oil from Russia would create an energy crisis, pushing oil prices to even higher levels.
Sanctions against Russia are expected to push the price of oil even higher, even though the US and the EU have so far avoided imposing direct sanctions on Russia’s gas and oil exports. Germany however, has suspended the approval of the Nord Stream 2 pipeline, a move which may cause an energy crisis in Europe, which depends on Russia for approximately 40% of its gas and send the prices of energy-related assets even higher.
The price of oil has been increasing over the past months, as existing international inventories are tight and supply is trying to catch up with rising demand. The International Energy Agency agreed on Tuesday to release 60 million barrels of crude oil from strategic reserves to check the ascend of oil prices. The amount, however, fell short of market expectations and will do little to alleviate pressure on the energy sector. It has also been reported that Iran could add 900,000 barrels a day if a deal with the US is struck over its nuclear program, which might help to alleviate the energy crisis somewhat.
Wednesday, March 2nd is an especially crucial day for the price of oil and heavy volatility is expected at oil price throughout the day. The next OPEC+ meeting is scheduled for Wednesday, and the situation in Ukraine is going to be discussed in the meeting, as well as skyrocketing oil prices. The organization is expected to maintain its goal of increasing oil output by 400,000 barrels per day, despite the war in Ukraine. Global oil prices have increased by more than 11% since OPEC’s last meeting in February, and the main subject of the meeting is expected to be to avoid a disruption in the distribution of oil, which would push prices even higher. US Crude Oil Inventories are also scheduled to be released on Wednesday and may also affect the price of oil.
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