Uncertainty sent oil prices higher on Sunday as more and more Russian troops landed on the Ukrainian border.
Oil prices were essentially flat last week as traders predicted a potential nuclear deal with Iran could allow the country to bring millions of gallons of oil to market. But with tensions rising along the Russia-Ukraine border, the oil market opened in the evening trading one dollar/barrel higher.
President Biden and other senior US officials have said that Russian President Putin decided to invade Ukraine despite the threat of crippling sanctions. Any invasion would most likely disrupt Russian shipments of natural gas and oil to parts of Europe and subsequently a decrease in Russian energy purchases by the West. However, negotiations continue on many fronts.
The United States and many other industrialized countries will most likely release millions of barrels of oil from their strategic reserves as soon as a significant invasion occurs. In Washington there was also talk of suspending the federal tax on gasoline. Such measures could help rein in pump prices, at least in the short term.
The national average price of a gallon of gas rose nearly 4 cents last week to $3.53, about 90 cents higher than a year ago. Gasoline prices at the pump usually follow the world oil price trend for about a week or two.
Despite the growing possibility of a conflict, US benchmark oil prices fell nearly 2% last week while global benchmarks gained less than a dollar a barrel. Both benchmarks remain above $90 per barrel, their highest levels since 2014.
On Sunday night, the US oil benchmark, West Texas Intermediate, rose nearly 2% to $92.73 a barrel, while the global benchmark Brent added 1.3% to $94.76 a barrel.
The United States is not a major importer of Russian oil, but Russia supplies about a tenth of the barrel consumed by the global economy as the third-largest producer after the United States and Saudi Arabia. Russia’s oil exports are mainly to Europe and Asia, and the global market remains tight as production has not kept pace with the economic recovery from the Covid-19 pandemic.
U.S. oil production has been steadily increasing in recent months, and Saudi Arabia and the United Arab Emirates are believed to have spare production capacity. But it would take a nuclear deal with Iran to bring the new barrels to the global market quickly. Iran has up to 80 million bpd in stock, which it can sell relatively quickly and could ramp up production to 1.2 million bpd within eight months. But in a market of 100 million bpd, that will not solve the shortage if there is a protracted war in Eastern Europe.
https://www.nytimes.com/2022/02/20/business/oil-prices-russia-ukraine-iran.html Oil prices climb as Russia overtakes Ukraine