May 23, 2022

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Oil prices rose more than 1% to a 7-year high on fears of supply disruptions

Oil prices rose more than 1% to a 7-year high on fears of supply disruptions

The sun behind a crane pumping crude oil in the Permian Basin in Loving County, Texas, United States, November 22, 2019. REUTERS/Angus Mordant // File Photo

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  • Brent rose 1.2 percent and West Texas Intermediate gained 1.5 percent by 0506 GMT
  • US drilling companies add most oil rigs in a week since February 2018 – Baker Hughes

SINGAPORE (Reuters) – Oil prices hit their highest levels in more than seven years on Monday amid fears that a possible Russian invasion of Ukraine could lead to U.S. and European sanctions that would disrupt exports from the world’s biggest producer in an already tight market. .

Brent crude futures were at $95.61 a barrel by 0506 GMT, up $1.17, or 1.2%, after earlier hitting a peak of $96.16, the highest since October 2014. US West Texas Intermediate crude rose $1.41, or 1.5%, to $94.51. A barrel, it is hovering near the session high of $94.94, the highest since September 2014.

Comments from the United States about an imminent attack by Russia on Ukraine have shaken global financial markets.

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The United States said on Sunday that Russia could invade Ukraine at any time and could create a sudden pretext for an attack. Read more

“If the movement of forces occurs, then Brent crude will have no problem rising above the $100 level,” Edward Moya, an analyst at Oanda, said in a note.

“Oil prices will remain very volatile and sensitive to increased updates regarding the situation in Ukraine.”

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The tensions come as the Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, struggle to raise production despite monthly pledges to raise output by 400,000 barrels per day until March.

The International Energy Agency said the gap between OPEC+ production and its target widened to 900,000 bpd in January, while JPMorgan said the gap for OPEC alone was 1.2 million bpd. Read more

“We are noticing signs of tension across the group: seven members of OPEC-10 failed to meet quota increases for the month with the largest deficits shown by Iraq,” JPMorgan analysts said in a note on Feb. 11.

The bank added that the super-cycle is in full swing with “oil prices likely to exceed $125 per barrel as the excess capacity risk premium increases.”

Excess supplies are limited and demand for oil has outpaced production growth, said CMC Markets analyst Tina Teng, as economies bounced back from the worst of the coronavirus pandemic.

“It won’t take long for prices to go higher, although world leaders are rushing to help defuse the rising tension,” she added.

Investors are also watching talks between the United States and Iran to revive the 2015 nuclear deal.

But a senior Iranian security official said on Monday that progress in the talks had become “more difficult”. Read more

Baker Hughes Energy Services said on Friday that strong oil prices in the United States are encouraging energy companies to increase production as it added the most oil rigs in four years last week. Read more

(Reporting by Florence Tan) Editing by Kenneth Maxwell

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