Global oil prices are surging as markets react to Russia’s invasion of Ukraine and possible disruptions to crude oil flows.
“War has come to the heartland of Europe, and if the Ukraine conflict draws in the might of the Russian army and other interested and well-equipped forces, unconstrained upside risk to regional geopolitics and oil prices are highly likely in the near term,” said Louise Dickson, a senior oil market analyst at Rystad Energy.
Oil prices are soaring with no end in sight on the news of Russia’s full-scale military incursion of Ukraine, which immediately put at risk up to 1 million b/d of Russian crude oil exports transiting through Ukraine and the Black Sea.
The Brent benchmark crossed the $100 mark on the morning of Feb. 24, and prices will only climb further amid low inventories and disruptions to exports. The price ceiling for crude could rise further in the coming days if supplies from northern seaports or even Asia-bound crude barrels face imminent disruption.
“Prices could approach $130/bbl by June if the Ukrainian conflict disrupts Russian crude flows, but that estimate could soar higher if additional disruptions materialize,” Dickson said.
According to Dickson, a swift takeover of Ukraine by Russia and a muted response from the West could actually cap the price volatility. However, the short-term stoking of oil prices will have a wide range of impacts on the oil market – significant disruptions or oil trade flows will be inevitable, as Europe currently sources 25% of its oil imports from Russia, and its port terminals and infrastructure are not equipped for a sudden pivot from piped crude and oil products to port deliveries.
Meantime, the price spike could also move OPEC+ to shore up supplies, perhaps to be announced at its Mar. 2 meeting, or expedite an Iranian deal to bring supply-side relief.