January 28, 2023

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Oil settles near a seven-year high due to tensions between Ukraine and Russia

Oil settles near a seven-year high due to tensions between Ukraine and Russia

The sun behind a crane pumping crude oil in the Permian Basin in Loving County, Texas, United States, November 22, 2019. REUTERS/Angus Mordant // File Photo

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LONDON (Reuters) – Oil stabilized on Monday after hitting its highest level in more than seven years on concerns that a possible Russian invasion of Ukraine could lead to US and European sanctions that could disrupt exports from one of the world’s largest producers.

Brent crude rose 11 cents, or 0.1 percent, to $94.55 a barrel by 1107 GMT, after earlier hitting a peak at $96.16, its highest since October 2014.

US West Texas Intermediate crude rose 9 cents, or 0.1 percent, to $93.19 a barrel, after hitting $94.94 earlier, its highest since September 2014.

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“Market participants are concerned that the conflict between Russia and Ukraine could disrupt supplies,” said Giovanni Stonovo, commodity analyst at UBS.

He added that the oil market is very sensitive to any news of a possible supply disruption as oil inventories are low and producers’ spare capacity is expected to decrease.

Comments from the United States about an imminent attack by Russia on Ukraine have shaken global financial markets.

The United States said on Sunday that Russia could invade Ukraine at any time and could create a sudden pretext for an attack. Read more

“If Russia invades Ukraine, crude oil and natural gas prices are expected to rise significantly. In this case, Brent is likely to exceed $100 per barrel,” said Carsten Fritsch, an analyst at Commerzbank.

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The tensions come as the Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, struggle to raise production despite monthly pledges to raise output by 400,000 barrels per day until March.

“Oil prices are once again under massive upward pressure as OPEC+ failed to meet its production targets by 900,000 barrels in January,” said Pratibha Thacker, managing editor for the Middle East and Africa region at The Economist Intelligence Unit.

The head of the International Energy Agency, Fatih Birol, on Monday urged OPEC+ to bridge the gap between its words and its actions. Read more

Investors are also watching talks between the United States and Iran to revive the 2015 nuclear deal.

On Monday, an Iranian foreign ministry spokesman said the talks had not reached a dead end, although a senior Iranian security official said earlier that progress had become “more difficult”. Read more

“The nuclear deal between the United States and Iran could take out 1.3 million barrels of supplies, but that will not be enough to ease supply constraints,” Thacker said.

Brent / gas
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Additional reporting by Bozorgmehr Sharafuddin in Lonoden and Florence Tan in Singapore; Editing by Kenneth Maxwell, Kim Coogle, Michael Urquhart and Jean Harvey

Our criteria: Thomson Reuters Trust Principles.