Tuesday Feb 22 2022
BDBusiness Desk

Oil hits highest since 2014 on Russia-Ukraine escalation

BDBusiness Desk
Crude oil storage tanks are seen from above at the Cushing oil hub, in Cushing, Oklahoma, March 24, 2016. — Reuters/File
Crude oil storage tanks are seen from above at the Cushing oil hub, in Cushing, Oklahoma, March 24, 2016. — Reuters/File

  • Brent closes in on $100 a barrel.
  • Prices of petroleum products in Pakistan are bound to rise next month.
  • US, European allies poised to announce new Russia sanctions.

LONDON: Oil hit its highest since 2014 on Tuesday as tensions between Russia and Ukraine escalated after Moscow ordered troops into two breakaway regions in eastern Ukraine, adding to supply concerns that are pushing prices to near $100 a barrel.

The United States and its European allies are poised to announce new sanctions against Russia after President Vladimir Putin formally recognised the two regions in eastern Ukraine, escalating a security crisis on the continent. 

"The potential for a rally over $100 a barrel has received an enormous boost," said Tamas Varga of oil broker PVM. "Those who have bet on such a move anticipated the escalation of the conflict."

Read more: Petrol price increases in Pakistan by Rs12.03

Brent crude, the global benchmark, was up $3.48, or 3.7%, at $98.87, having earlier reached $99.38, the highest since September 2014.

US West Texas Intermediate (WTI) crude jumped $4.41, or 4.8%, to $95.48 versus Friday's settlement, having earlier reached $96, also the highest since 2014. The US market was closed on Monday for a public holiday.

The crisis over Ukraine has added further support to an oil market that has surged due to tight supplies as demand recovers from the coronavirus pandemic.

The Organisation of the Petroleum Exporting Countries and allies, known as OPEC+, have resisted calls to boost supply more rapidly.

A senior British minister said on Tuesday Russia's invasion of Ukraine has created a situation as grave as the 1962 Cuban missile crisis, when a confrontation between the United States and the Soviet Union brought the world to the brink of nuclear war.

Read more: Why was there a hike in petrol price in Pakistan?

Nigeria's minister of state for petroleum on Tuesday stuck to the OPEC+ view that more supply was not needed, citing the prospect of more production from Iran if its nuclear deal with world powers is revived.

Talks are ongoing on renewing Iran's nuclear agreement with world powers, which could eventually boost Iran's oil exports by over 1 million barrels per day. 

Impact on Pakistan

It is expected that the prices of petroleum products might further escalate in Pakistan as the government had last hiked petrol price by over Rs12 to near an unprecedented level of Rs160 per litre, The News reported.

However, it was calculated when Brent Crude was at $88 per barrel. As Brent Crude has already neared $100 per barrel, the prices of local petroleum products are bound to rise next month.

— With additional input from Reuters