Oil prices surged overnight after the Opec+ 23-member alliance of producers stuck with its production plans for April and the Ukraine-Russia crisis continued to weigh on markets.
Brent, the global benchmark for two thirds of the world's oil, surged 5.6 per cent to $119.3 per barrel at 11.44am UAE time on Thursday. West Texas Intermediate, the gauge that tracks US crude, rallied 4.96 per cent to $116.1 a barrel, its highest since 2008.
Brent hit a record high of $147.02 on July 11, 2008 amid the global financial crisis, while WTI soared to $146.90.
"The vertiginous surge in global commodities has surpassed even our above consensus expectations that we laid out in our annual 2022 outlook," said Ehsan Khoman, head of emerging markets research at Japan's largest lender MUFG Bank.
"The rally will stoke a torrent of inflationary pressures as the building blocks of the global economy gets ever more costly. It is this premise that we believe commodities are now marching to levels where demand destruction – through still higher prices – will become prevalent."
The US and EU have levied a slew of sanctions against Russia, which is a major global energy producer and leads the Opec+ 23-member alliance along with Saudi Arabia.
The wave of punitive measures against Moscow aim to cripple its economy but have not targeted its energy and commodity industries. That is largely a result of the country's clout as an oil producer and commodity exporter, which if singled out, could have reverberations on the global economy which is recovering from the pandemic.
While Russian gas continues to be supplied to customers, the sanctions against Russia have induced self-sanctioning among countries and customers who fear being punished.
Buyers and shipbrokers are "skittish to move Russian seaborne oil given the ambiguity of what's legally permissible, concerns surrounding reputational repercussions and/or merely for moral obligations. Global gas markets are facing a similar fate as with oil, with sustained higher gas prices bracing European authorities to bring forward disaster planning for next winter", Mr Khoman said.
Jeffrey Halley, senior market analyst at Oanda said “even if Western sanctions appear to be allowing energy payments to continue, Western financial institutions are taking no chances”.
“Geopolitics is driving markets and not traders. Brent crude is now in shouting distance of my initial $120 a barrel target and with markets unable to magically replace $5 million bpd of Russian oil exports, it seems when and not if it will hit this level. WTI could also potentially move to $120.00 in the sessions ahead.”
Despite the Ukraine conflict, an already tight market because of years of underinvestment in the energy industry and high demand due to the global economy recovering from the pandemic, Opec+ on Wednesday kept to its 400,000 barrel-a-day production increase plan that was scheduled for April.
“The decision had seemingly no dissent and the ministerial meeting was completed in a brief period. Critically, the statement following the meeting made no mention of the war in Eastern Europe nor of any threat to Russian exports of oil that could come as a result of its invasion of Ukraine,” Emirates NBD said in a note on Thursday.
The April production levels are the last before new higher baseline levels come into effect that will allow relatively larger monthly increases from some producers, including the UAE.
Russia’s military offensive in Ukraine could wipe out 1 million bpd of regional oil demand, affecting global balances, according to Rystad Energy.
“The economic fallout from the war — in addition to the humanitarian crisis — is going to be sweeping, both for Russia and Ukraine, and the region’s oil demand is going to take a severe hit if the conflict is prolonged and recently enacted sanctions remain in place,” says Sofia Guidi Di Sante, oil market analyst with Rystad Energy.
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Damage after the shelling of buildings in central Kharkiv, Ukraine. EPA -
Workers from a local construction company weld anti-tank obstacles to be placed on roads around Kyiv as Russia's invasion of Ukraine continues. Reuters -
Anti-war protesters attach sunflowers to barriers in front of the Russian embassy. Reuters -
Ukrainian volunteers prepare food for displaced people outside Lviv railway station in western Ukraine. AP -
A Ukrainian soldier holds an anti-tank launcher north-east of Kyiv. AFP -
Ukrainian refugees rest at Warsaw East train station in Poland. EPA -
Children look out from a carriage window as a train prepares to depart from a station in Lviv to the town of Uzhhorod near the border with Slovakia. AFP -
A girl who fled Ukraine is reunited with her father in Medyka, south-eastern Poland. AP Photo -
Tears outside a house damaged by a Russian airstrike in Gorenka, on the outskirts of Kyiv. AP Photo -
A civil defence member is poised to shoot as a vehicle approaches a checkpoint in Gorenka. AP Photo -
A Ukrainian civil defence member in the garden of a house damaged by a Russian airstrike. AP Photo -
Members of the US Army 3rd Infantry Division board a plane bound for Germany in Savannah, Georgia. EPA -
Prayers for peace in Ukraine at the Vatican's Saint Peter's Square. AFP -
A woman (right) hugs an arriving passenger from a train carrying refugees at Berlin's central station. EPA -
Firefighters battle a blaze in a Kharkiv police building hit by shelling. AFP -
A Ukrainian woman makes a phone call after crossing the Slovakian border. AFP -
A doctor takes shelter in the basement of a Kyiv perinatal centre. Reuters -
Debris which locals say was caused by shelling in separatist-controlled Horlivka, Donetsk. Reuters -
MPs in London give a standing ovation to Ukraine ambassador Vadym Prystaiko, who was in the public gallery. AP -
Distraught women and children fleeing Ukraine wait to enter Poland at the Korczowa crossing. Getty -
Newborn Ivan lies next to his mother as they shelter in the basement of a Kyiv perinatal centre. Reuters -
Firefighters hand water to people in a Ukrainian train full of refugees in Przemysl, Poland. Reuters -
Ukrainian refugees queue to file for residency permits at Prague's police headquarters. AFP -
Firefighters work to contain a blaze in buildings housing the Kharkiv regional police department. AFP -
A woman and her children sit in a tent in the Kyiv subway, using it as a bomb shelter. AP -
Firefighters work to extinguish a blaze at the Kharkiv National University building, which city officials said was damaged by Russian shelling. Reuters -
An elderly woman comforts a child as they take shelter inside an underground station in Kyiv. Reuters -
People queue at a pharmacy in central Kyiv. Reuters -
A woman is consoled by a volunteer after fleeing from Russia's invasion of Ukraine, at the border crossing in Siret, Romania. Reuters -
A Ukrainian civilian in the city of Zhytomyr practises throwing petrol bombs. Reuters -
Ukrainian President Volodymyr Zelenskyy poses after an interview with Reuters in Kyiv. Reuters -
A blast is seen at Kyiv's TV tower. Reuters -
A girl in Siret, Romania, covers herself with a blanket after fleeing from Ukraine. Reuters -
Ukraine's ambassador to the US, Oksana Markarova, acknowledges applause from US first lady Jill Biden as they attend President Joe Biden's first State of the Union address in Washington. AFP -
A man walks past the remains of Russian military vehicles in Bucha, close to Kyiv. AFP -
Civilians cross a river on a blown-up bridge on Kyiv's northern front. Defending the capital is a 'key priority', Ukraine's president has said. AFP -
Russian aircraft on the ground at Luninets Airbase, Belarus, about 50 kilometres north of the Ukrainian border. AFP -
People look at the gutted remains of Russian military vehicles on a road in the town of Bucha. AP -
A woman with a child who fled from the war in Ukraine reunite with their family after crossing the border in Medyka, Poland. AP -
Animal keeper Kirilo Trantin comforts an elephant at Kyiv Zoo. AP -
An armed man stands by the remains of a Russian military vehicle in Bucha. AP -
Ukrainian families say goodbye as they prepare to board a bus to Poland at Lviv, western Ukraine. AP -
Paramedics move a man who was wounded by shelling in a residential area of Mariupol, south-eastern Ukraine. AP -
Rescuers work at the site of a Russian strike in Zhytomyr. Reuters -
US actor and director Sean Penn attends a press briefing at the Presidential Office in Kyiv. Reuters -
Demonstrators participate in a protest against Russia’s invasion of Ukraine at Lafayette Square in Washington. AFP -
Ukrainian soldiers rest while others eat near the front line with Russian troops in northern Kyiv. AP -
A barricade made of trams, buses and sand bags is seen through the window of car in the northern part of Kyiv. AP -
Members of the European Parliament applaud after Ukrainian President Volodymyr Zelenskyy's speech at a special session to debate its response to the Russian invasion of Ukraine. Reuters -
Ambassadors and diplomats walk out as Russia's Foreign Minister Sergey Lavrov (on screen) speaks during a recorded message at the 49th session of the UN Human Rights Council in Geneva. EPA
