Florence Tan

SINGAPORE, (Reuters) – Oil prices climbed to their highest level in seven years Monday due to fears of a Russian invasion of Ukraine. This could lead the United States and Europeans to impose sanctions on Russia that would affect exports in a market already tight.

Futures reached $95.61 per barrel by 0506 GMT. That’s an increase of $1.17 (or 1.2%) after hitting a high of $96.16 earlier in the day. It was also up 1.2% since Oct 2014. U.S. West Texas Intermediate oil rose $1.41 or 1.5% to $94.51/barrel, nearing a session record of $94.94, its highest level since September 2014.

Global financial markets have been rattled by comments from the United States regarding an attack on Ukraine by Russia.

According to the United States, Russia can invade Ukraine anytime and could create a pretext for an attack.

Edward Moya, an OANDA analyst said that Brent crude will not have trouble rising above $100 if there is a troop movement.

“Oil prices are likely to remain volatile and responsive to incremental updates concerning the Ukraine situation.”

These tensions occur as the Organization of the Petroleum Exporting Countries and its allies, a group called OPEC+ struggle to raise output despite the monthly commitments to increase production by 400,000 barrels a day (bpd), until March.

International Energy Agency stated the gap between OPEC+ output & its target widened at 900,000 bpd January. JP Morgan, however, said that it was only 1.2million bpd.

JP Morgan analysts stated in a February 11 note that they had noticed signs of strain in the group. Seven members of OPEC-10 did not meet quota increase requirements in the month. The largest shortfall was exhibited by Iraq.

According to the bank, oil prices could rise up to $125/barrel due to an increase in spare capacity risk premium.

Tina Teng, a CMC Markets analyst said that there is limited supply and oil demand. This was as a result of economies recovering from the severe coronavirus pandemic.

“It wouldn’t take long for the prices to rise higher, although global leaders are rushing help ease the growing tension,” she said.

Investors also monitor talks between Iran and the United States to revive 2015’s nuclear agreement.

A senior Iranian security officer said Monday however that the pace of talks is becoming more difficult.

According to Baker Hughes Co energy services firm, US, strong oil prices have encouraged energy companies in America to boost their output. Last week saw the addition of the fourth most oil rigs ever built.