Oil price hits $90 for the first time in seven years

An oil refinery in Houston, Texas. Futures in New York rose as much as 2 per cent with the global benchmark touching $90 a barrel for the first time in seven years on Wednesday. AFP

Oil markets rallied alongside a broader market rebound while rising tension in the Russia-Ukraine conflict caused jitters in the market about potential supply disruptions.

Futures in New York rose as much as 2 per cent with the global benchmark touching $90 a barrel for the first time in seven years on Wednesday. Inventories at the largest US oil hub fell 1.8 million barrels for the third week in a row. The oil market’s structure has surged in recent days, signalling tight supply.

Prices are also moving on mounting concern over a possible Russian incursion into Ukraine, with US President Joe Biden saying he would consider sanctioning Russian President Vladimir Putin if he orders an invasion.

While a potential conflict carries large risks for financial markets, especially energy commodities such as natural gas and oil, Goldman Sachs’s base case is for no disruption to supplies.

Crude is having a volatile week, slumping on Monday then rebounding on Tuesday. Prices are at a seven-year high with demand continuing to recover from the pandemic as mobility picks up.

A string of Wall Street banks including Goldman Sachs Group have forecast oil will hit $100 a barrel this year as the global market tightens.

“The market has basically been in persistent undersupply since mid-2020, thanks to Opec+ cuts and a continued oil demand recovery,” said Helge Andre Martinsen, senior oil analyst at DNB ASA.

“We fully acknowledge that the world is not running out of oil resources, but we might enter an oil-market squeeze triggered by too little investment and oil demand rebounding quickly.”