Oil prices surged past $110 a barrel during Wednesday’s session as investors’ concerns mounted over potential supply disruptions from an intensifying Russia-Ukraine war.
OPEC+, made up of the Organization of the Petroleum Exporting Countries and its allies, including Russia, offered no surprises at its monthly meeting, quickly agreeing to boost production in April by another 400,000 barrels a day.
April West Texas Intermediate crude futures
rose $4.16, or 4%, to $107.57 a barrel on the New York Mercantile Exchange. Front-month contract prices are on track for their highest finish since September 2013. Prices reached an intraday high of $112.51, the highest since May 2011.
May Brent crude
the global benchmark, jumped $4.53, or 4.3%, to $109.50 a barrel after an intraday high of $113.94. It is poised for the highest settlement since July 2014.
April natural gas
rose 2.7% to $4.694 per million British thermal units.
Oil gains continue, with analysts commenting that the extra crude from the agreement to release 60 million barrels from the emergency oil reserves of member countries of the International Energy Agency is being viewed as a mere drop in the bucket of what would be needed to deal with potential war-linked disruptions.
That is as global buyers shunned Russian oil, with Trafigura Group offering a deep discount on a cargo of Urals grade for $18.60 a barrel drawing no bids on Tuesday, Bloomberg and other media outlets reported.
“Russia is starting a new phase of the campaign, bringing a lot more force to bear and shelling civilian areas. This poses the risk that the West will encounter growing pressure to sanction Russian oil and gas exports, with all that would entail,” said Neil Wilson, chief market analyst for Markets.com, in a note to clients.
“Centrica said it is urgently seeking to end its natural-gas supply agreement with Gazprom — self-sanctioning already well under way. Exxon Mobil followed Shell and BP to say it will exit Russia, leaving $4 billion in assets in doubt. We are seeing this with the container ships too, and banks,” he said.
Wilson also noted that OPEC+ technical exports had cut their expectations for the daily oil market surplus by 200,000 barrels to 1.1 million barrels.
“But the market is not really moving on this as much as just pure fear of immediate disruption to supplies; traders are getting hold of barrels at any price,” said Wilson.
Oil futures remained higher after the OPEC+ decision to continue its plan to gradually increase output.
This “modest increase” may signal that OPEC+ “isn’t as concerned with higher prices as others may be, and could just be willing to stick with its original plan all the way through given that prices have already broached $100, Rohan Reddy, research analyst at Global X, told MarketWatch.
The EIA reported on Wednesday that U.S. crude inventories fell by 2.6 million barrels for the week ended Feb. 25.
On average, the EIA was expected to show crude inventories up by 2.3 million barrels, according to analysts surveyed by Platts of S&P Global Commodity Insights. The American Petroleum Institute on Tuesday reported a 6.1 million-barrel decrease.
The EIA also reported weekly inventory declines of 500,000 barrels for gasoline and 600,000 barrels for distillates. The analyst survey showed expectations for weekly supply declines of 1.8 million barrels for gasoline and 2 million barrels for distillates.
The EIA data showed crude stocks at the Cushing, Okla., Nymex delivery hub edged down by 1 million barrels for the week, while stocks in the Strategic Petroleum Reserve fell 2.4 million barrels.