WASHINGTON: Oil prices rose on Wednesday and equities sank with investors growing increasingly fearful about the impact of Ukraine war n global energy supplies and the economic recovery.
Sanctions on Russian banks following Moscow’s invasion of Ukraine have hampered trade finance for crude shipments and some traders opted to avoid Russian supplies in an already tight market.
Brent crude broke above US$110 a barrel on Wednesday and WTI was up more than 5% as Russia’s invasion of Ukraine continued to fan fears over supplies of the crucial commodity from the resource-rich region.
Vladimir Putin’s incursion into the neighbouring country has seen world powers impose strict, far-reaching sanctions on Moscow in retaliation, fuelling worries that exports from Russia will be cut off.
The measures have injected a huge amount of uncertainty into markets with supplies of crucial commodities including metals and grains soaring. The price of global staple wheat is sitting at a 14-year high – having risen 30% in the past month.
The main source of unease on trading floors is crude, which has rocketed since Russia began preparing to invade. On Wednesday Brent topped US$110 for the first time since 2014, while WTI moved closer to that figure.
Russian oil exports account for around 8% of global supply. At the same time, while Western powers have not imposed sanctions on energy exports directly, US traders at hubs in New York and the US Gulf are shunning Russian crude.
READ MORE: Putin calls West an ‘Empire of Lies’ after sweeping sanctions
The conflict in eastern Europe came as prices were already soaring owing to tight supplies and a strong recovery in demand around the world as economies reopen from pandemic-induced lockdowns.
The Organization of the Petroleum Exporting Countries, 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. read more
Underscoring tightness in the market, the latest data from the American Petroleum Institute industry group showed US crude inventories fell by 6.1 million barrels for the week ended Feb 25. The US Energy Information Administration is due to release weekly data with analysts expecting a crude inventory build of 2.7 million barrels.
In his State of the Union address, President Joe Biden said the US would join a 30-country deal to release 60 million barrels to help temper the surge in prices, though analysts have warned such moves would likely only have a limited impact. The oil price surge has compounded fears about inflation as it sits at a 40-year high in the United States and hurts Americans as the economy rebounds from the pandemic shock.
