By Barani Krishnan

Investing.com – Global oil markets closed at 8% after ceasefire negotiations between Russia and Ukraine failed. Traders were concerned that Moscow’s international sanctions could cause a crash in exports out of a country which is the center of global energy markets.

For its first closing in August 2014, the most active contract traded in global crude benchmark closed up 3.98 percent, or 4.4% at $104.97 per barrel. It spiked to as high as $107.97 during the session, also marking a 7-½ year peak.

U.S. crude’s West Texas Intermediate, or benchmark, settled up $7.69, or 8%, at $103.41 a barrel on its front month. WTI reached an intraday high of $106.75 in the session. This is also its best performance since 2014.

Tuesday’s run-up in oil prices came despite the Paris-based International Energy Agency announcing the coordinated release of 60 million barrels from the emergency reserves of consuming countries to provide some relief to the 31 nations on its membership.

The EIA said it intended “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”.

However, analysts believe that Russia’s energy losses to the market are too severe to ignore. 

Some 10% of the world’s crude and 40% of Europe’s gas needs are provided by Russia.

“The oil rally has seriously accelerated today, breezing past $100 and gathering momentum along the way … despite the U.S. once again leading discussions around a coordinated release of oil reserves … which is clearly doing little to calm the nerves,” said Craig Erlam, analyst at online trading platform OANDA. “We saw an underwhelmed reaction when this (coordinate release) happened in November as well … before Russia invaded Ukraine.”

As energy giants such as Shell (LON:) and BP (NYSE:) abandon projects in Russia, the world is beginning to “see what impact these sanctions could have on Russian oil exports and the challenges they pose and that’s driving the price higher”, added Erlam.

Britain’s giant BP said Sunday that it is “exiting” its $14 billion stake in Russian oil giant Rosneft.

Anglo-Dutch owned Shell said that it would exit its Russian operations including the major liquefied natural gases plant.  

On Tuesday, the U.K. government added to the world’s move to isolate Russia by launching an urgent review of Britain’s exposure to Russian gas and energy groups, the Financial Times reported. 

Russian gas exports were also set to suffer in the next months. The IEA announced that it would release a 10-point plan by Thursday on how European countries can reduce dependence on Russian gas supply.

The move comes on the heels of Tuesday’s meeting among ministers of energy consuming countries that discussed “looking to other suppliers, including via LNG (liquefied natural gas), and to continue to pursue a well-managed acceleration of clean energy transitions”, the Paris-based IEA said. 

Around a third, or roughly, of Europe’s gas consumption comes from Russia’s Nord Stream 1 (or Yamal) gas pipelines. There is speculation that US LNG exports will rise to offset any decrease in Russian gas flow to Europe.

On Tuesday, the front-month settled at $4.57/thermal unit in the US.

The West had taken pains initially not to target Moscow’s energy exports with sanctions due to its own reliance on Russian oil and gas. 

But that mindset changed over the weekend, with the United States, Britain, Europe and Canada blocking the access of various Russian banks to the SWIFT global interbank payment system —  squeezing the billions of dollars that Russia trades a day in oil and other commodities. 

EU officials affirmed on Monday their plan to wean the bloc from its dependence on  Russian energy, while being prepared to suffer spiraling oil and gas costs in the short-term.  Since the beginning of this year, crude oil prices have increased by more than 35% while US natural gas gained approximately 23%.

The latest rally in energy prices came ahead of Wednesday’s meeting of global oil producer alliance OPEC+, which is expected to stay with its gradual output increase strategy, ignoring calls from consuming nations under the IEA.