Brent crude soared near $130 a barrel on Monday, its highest since 2008, as the United States and European allies consider a Russian oil import ban and delays in the potential return of Iranian crude to global markets fueled tight supply fears, according to Reuters.
Brent crude futures jumped $10.88, or 9.2%, to $128.99 a barrel by 0723 GMT, while U.S. West Texas Intermediate (WTI) crude climbed $9.80, or 8.5%, to $125.48.
In the first few minutes of trade on Monday, both benchmarks spiked more than $10 a barrel to their highest since July 2008 with Brent at $139.13 and WTI at $130.50.
Monday’s intraday highs are near record levels seen for both contracts in July 2008 when Brent hit $147.50 a barrel and WTI touched $147.27.
The United States and European allies are exploring banning imports of Russian oil, Blinken said on Sunday, and the White House coordinated with key Congressional committees moving forward with their own ban.
“The scramble for additional barrels to fill what could balloon to a 3-4 mb/d Russian export deficit will undoubtedly move into warp speed this week,” RBC Capital’s Helima Croft said in a note.
“This could prove to be a tall order as immediate OPEC spare capacity currently rests with Saudi Arabia, UAE, Kuwait, and Iraq, and we estimate that these four countries could only bring on between 2.0-2.5 mb/d in the next 30-60 days,” she said, adding that it remains to be seen how many countries will join a formal Russian oil embargo.
Global oil prices have spiked more than 60% since the start of 2022, along with other commodities, raising concerns about world economic growth and stagflation. China, world’s No. 2 economy, is already targeting a slower growth of 5.5% this year.
Fuel prices have surpassed 2008 records with U.S. gasoline at a high of $3.890 per gallon and heating oil futures at $4.237 per gallon.
Analysts at Bank of America said if most of Russia’s oil exports are cut off, there could be a 5 million barrel or larger shortfall, and that means oil prices could double from $100 to $200 a barrel, while JP Morgan analysts said this week oil could soar to $185 per barrel this year.
Russia is the world’s top exporter of crude and oil products combined, with exports at around 7 million bpd, or 7% of global supply. Some volumes of Kazakhstan’s oil exports from Russian ports have also faced complications.
Despite the oil price surge, U.S. energy firms cut the number of operating oil rigs last week, underscoring supply concerns. In Libya, the closure of the El Feel and Sharara oilfields resulted in the loss of 330,000 barrels per day (bpd), the National Oil Corporation (NOC) said on Sunday, more than 25% of its output in 2021.