Oil prices spiked to new highs over mounting fears of supply disruptions amid sanctions targeting the Russian economy after it invaded Ukraine and despite a coordinated move by oil-producing countries to bolster market supply.
International benchmark Brent crude was trading at $110.75 per barrel at 0706 GMT for a 5.5% gain after closing the previous session at $104.97 a barrel.
American benchmark West Texas Intermediate (WTI) traded at $109.19 per barrel at the same time for a 5.6% increase after the previous session closed at $103.41 a barrel.
The rapid surge in prices started after Moscow recognized Ukraine's breakaway regions of Donetsk and Luhansk.
Tension further accelerated as Russia proceeded with its aggression and invaded the country, after which talks between Russia and Ukraine on the Belarus border failed to reach a successful outcome.
The Russian intervention was met by an outcry from the international community last week, with the European Union, the UK and US implementing a range of economic sanctions against the Kremlin.
Russia has been further isolated as its airlines have been banned from traveling in European airspace and a number of its banks have been kicked out of the SWIFT international banking system.
Fears of possible supply disruptions already intensified and pushed prices up to $105 a barrel. Meanwhile, some big oil companies decided to exit or divest their assets in Russia, fueling supply fears and propelling prices to $111 a barrel.
ExxonMobil, bp, Shell and Equinor announced their exit plans from joint ventures and projects in Russia, and TotalEnergies also agreed to no longer invest in new projects in the country.
The growing market uncertainty ahead of the meeting of the OPEC+ group on Wednesday is putting additional upward pressure on prices.
To provide some market relief, ministers from International Energy Agency (IEA) member countries agreed to release 60 million barrels of oil from storage “to send a unified and strong message to global oil markets that there will be no shortfall in supplies as a result of Russia’s invasion of Ukraine.'
The ministers noted that Russia's invasion comes amid an already-tight global oil market, increased price volatility, the lowest commercial inventories since 2014, and the limited ability of producers to provide additional supply in the short term.
The announcement of an initial release of 60 million barrels, or 4% of IEA members' emergency stockpiles of 1.5 billion barrels, is equivalent to 2 million barrels a day for 30 days.
The coordinated drawdown is the fourth in the history of the IEA since its formation in 1974. Previous collective action was taken in 2011, 2005 and 1991.
-Venezuelan oil is alternative to Russian oil
Randall Mohammed, a financial representative of US-based Northwestern Mutual and energy market commentator, said the oil majors’ departure of Russia “would negatively impact the market.” This comes at a time when, according to the former secretary-general of OPEC Mohammed Barkindo, the oil industry already needs $500 billion of investment to boost production.
'Whether those Russian NOCs (National Oil Companies) can fill the gap, I'm not certain, but no doubt a significant challenge,' he said.
Mohammed suggested that US-sanctioned Venezuela, which he said sits on the largest reserves of 300 billion barrels, could replace Russian imports to the US, the refineries of which are engineered to process heavier sour crudes that Venezuela typically supplies.
Putting more supply pressure on the market, the American Petroleum Institute (API) announced late Tuesday its estimate of a fall of 6.1 million barrels in US crude oil inventories, compared to the market expectation of a rise of 2.8 million barrels./aa
