Crude Oil At 7-Year High, Hits $110 A Barrel As Markets Avoid Russian Supply

Indian state-run refiner Bharat Petroleum is seeking extra oil from the Middle-East for April, fearing Western sanctions against Russia could hit deliveries of Urals crude

Brent crude futures gained $5.30 to $110.23 a barrel, while US WTI crude futures were up $5.02 to $108.41. Image: Getty

New Delhi: Crude oil rates soared to seven-year high on Wednesday because of disruptions in supply and apprehensions mounting after strict sanctions were imposed on Russian banks amid the intensifying Ukraine conflict, news agency Reuters has reported.

Crude oil market traders scrambled to seek alternative oil sources in an already tight market due to such volatility in the crude market. 

Brent crude futures gained $5.30 (5 per cent) to $110.23 a barrel 9:59 am, a level last seen in July 2014. US West Texas Intermediate (WTI) crude futures were up $5.02 (4.8 per cent) to $108.41, after earlier hitting the highest since September 2013.

Westpac economist Justin Smirk told Reuters, “Trade disruptions are starting to get people’s attention. Issues around trade finance and insurance, that's all impacting exports from the Black Sea. The supply shocks are unfolding.”

Russian oil exports account for about 8 per cent of global supply.

Exxon Mobil on Tuesday said it would exit oil and gas operations in Russa due to Moscow's invasion of Ukraine. The decision will see the company pull out of managing large production facilities on Sakhalin Island in Russia's Far East.

Meanwhile, while Western nations have not imposed sanctions on energy exports directly, US traders at hubs in New York and the US Gulf are shunning Russian crude.

Indian state-run refiner Bharat Petroleum is seeking extra oil from the Middle-East for April, fearing Western sanctions against Russia could hit deliveries of Urals crude.

Sources told Reuters that Saudi Arabia may sharply hike prices of crude for Asia in April, with differentials for most grades hitting all-time highs as global supplies tighten over financing and shipping issues from sanctions on Russia.

A coordinated release of 60 million barrels of oil by International Energy Agency (IEA) member countries agreed on Tuesday put a lid on market gains, but analysts said that would only provide temporary relief on the supply front.

“They helped to cap the rise, but if you want to turn prices around, you need something more sustainable,” Smirk said.

The IEA said that commercial oil stockpiles are at their lowest since 2014.

Against that backdrop, the Organization of the Petroleum Exporting Countries (OPEC), Russia and allies, together known as OPEC+, are due to meet on Wednesday, where they are expected to stick to plans to add 400,000 barrels per day of supply each month.