Oil Resumes Upward Climb As Russian/Ukraine Tensions Mount

Vitol believes $100 oil is not only inevitable but will last for months: File Image/Pixabay

Another week, another war of nerves on the world stage as Russia seemed poised to invade Ukraine regardless of sanction threats from the U.S. and its allies – and as a result, oil prices on Monday resumed their upward trajectory.

West Texas Intermediate rose $2.79 to $93.86 per barrel at 2:19 p.m. ET, while Brent rose $1.85 to settle at $95.39 per barrel, after the Kremlin announced plans to officially recognize separatists in eastern Ukraine: a move that could undermine European-mediated peace talks and further escalate tensions.

Oil was also supported on Monday by Saudi Aramco stating that demand continues to rebound from the pandemic, especially in Asia, and by Russell Hardy, CEO of Vitol Group, musing that oil prices could surpass $100 per barrel for the next six to nine months.

He said, "Demand is going to surge in the second half" and exceed 100 million barrels per day (bpd) if travel returns to normal: "Eventually we're going to run out of spare capacity; that's what the market is trying to work out, how worried to be about that scenario."

Hardy added that energy supplies are only arriving "just in time at the moment, which is not a great place to be."

Concern over supplies wasn't helped by ministers of Arab oil producing countries, who over the weekend rejected calls to pump more and said that the Organization of the Petroleum Exporting Countries (OPEC) and its allies stick to its current agreement to add 400,000 bpd of oil output each month.

Meanwhile, vying for its share of media headlines in the shadow of the Russia/Ukraine conflict were the talks to revive Iran's 2015 nuclear agreement; on Monday Iranian foreign ministry spokesperson Saeed Khatibzadeh said "significant progress" had been made, after a senior European Union official stated on Friday that a deal was "very, very close."

While Iran's possible return to the global market has been widely viewed as a solution to uncomfortably tight inventories, Vivek Dhar, analyst at Commonwealth Bank, pointed out in a note, "If a Russian invasion takes place, as the U.S. and UK have warned in recent days, Brent futures could spike above $100/bbl, even if an Iranian deal is reached."