Energy and oil experts expected that oil prices would rise to above $100 a barrel soon, supported by several factors, most notably the Russian-Ukrainian tension, the possibility of more sanctions on Moscow, and an increase in global energy demand following the return of economic activity to circulation with the gradual lifting of the imposed restrictions. To counter the spread of the Corona virus.
Oil prices jumped more than two dollars on Tuesday, hitting a new record in seven years, following Russia ordered the deployment of its forces in two separatist regions in eastern Ukraine, in an escalation of a crisis that Western leaders have warned might spark a war.
On Monday evening, Russian President Vladimir Putin announced his country’s recognition of the independence of the breakaway regions of Donetsk and Luhansk.
Brent crude futures, the benchmark, rose to $97.66, the highest level since September 2014, before trimming some of its gains during today’s trading.
The impact of the Russian-Ukrainian crisis on oil prices comes from the fact that Russia is one of the largest oil producers in the world, and these tensions threaten crude supplies. Russia produces more than 10 million barrels per day.
Factors of high oil prices
Kuwaiti oil expert Dr. Ahmad Badr al-Kuh says that the tension between Russia and Ukraine will greatly push oil prices to continue rising, considering that Russia remains benefiting from the rise in these prices.
In an interview with Al-Jazeera Net, Badr Al-Kuh believes that the rise in oil prices in global markets is also linked to increased demand by global economies, coinciding with the gradual lifting of restrictions on confronting Corona, and the return of global economic activity to circulation once more.
He also said that the insistence of OPEC and its allies not to increase production at this stage and the lack of investments and financing of oil projects will in turn lead to a rise in prices.
But he considered that it is in the interest of the OPEC Plus group to continue at this level of production, while giving the market reassuring signals that the organization and its allies are continuing their approach to providing oil to customers.
Iranian oil return
In light of these factors, Al-Kooh expected that oil prices would rise to more than $100 per barrel, despite talk regarding the possibility of the return of Iranian oil flowing with signs that a solution to the nuclear file is near.
Al-Kooh considered that the return of the flow of Iranian oil will psychologically affect dealers in the markets more than it actually affects the reality, because Iranian oil will flow gradually and not all at once if a solution is found to the nuclear file and the accompanying lifting of sanctions.
The Nigerian Minister of State for Petroleum Timbrie Silva stressed on Tuesday that there is no need for the OPEC Plus group to increase oil production now, at a time when the group is awaiting a possible agreement between Iran and world powers that would make more supplies available.
“We do not have anything exceptional this time, because we expect a lot of production,” Silva said – on the sidelines of a conference of gas exporting countries in the capital, Doha.
“We expect more production if a nuclear deal with Iran is reached,” the Nigerian minister added.
Archyde.com quoted sources as saying that months of indirect talks between Iran and the United States to revive the 2015 nuclear deal have entered their final stages.
Former US President Donald Trump withdrew his country from the agreement in 2018.
Reaching an agreement would pave the way for OPEC member Iran to increase its oil exports, which would contribute to alleviating what many analysts see as a severe shortage in the oil market.
For his part, Qatari oil expert Muhammad Yaqoub al-Sayed expected that “oil prices will rise above $100 within a short period, perhaps within a week or a little more.”
He told Al Jazeera Net that the coming weeks will witness a flare-up of oil and gas prices in global markets with the intensification of Russian-Ukrainian tensions.
But the Qatari expert expressed his hope that these problems would be resolved quickly until the markets stabilize, because any rise in prices will negatively affect the global economy, which is starting to feel the way to recover from the repercussions of the Corona pandemic.
Sanctions on Russia
Al-Sayed did not rule out that the sanctions that the West will impose on Russia will affect global energy markets, given that Russia is one of the largest producers and exporters of oil and gas in the world.
On Tuesday, Britain imposed sanctions on 5 Russian banks and 3 high net worth individuals following Russian President Vladimir Putin ordered the deployment of troops in two separatist regions in eastern Ukraine.
“This is the first tranche of what we are prepared to impose,” British Prime Minister Boris Johnson said in a speech to Parliament.
For its part, the British Foreign Office said in a statement that Britain would pass legislation to prevent Russia from issuing sovereign debt in London markets if it did not de-escalate its escalation in Ukraine, opening the door to future sanctions.
“If Russia does not de-escalate, the UK will soon pass legislation preventing Russia, among other steps, from issuing sovereign debt in UK markets,” the statement said.
German Foreign Minister Annallina Bierbock said Tuesday that the G7 member states are united in imposing sanctions on Russia for its recognition of two breakaway regions in eastern Ukraine.
German Chancellor Olaf Scholz also announced Tuesday that he had decided to suspend the approval of the Nord Stream 2 gas pipeline with Russia in response to Moscow’s recognition of the two breakaway regions in eastern Ukraine, warning of possible additional sanctions.
And regarding whether we will witness a rapid rise in oil prices in the markets in light of the start of the West’s implementation of a series of sanctions once morest Russia, the expert in oil and energy affairs, Amer Al-Shobaki, said in an interview with Al-Jazeera network, “Even with assurances that the nuclear agreement with Iran will soon return, it is easily – and at any development or waiting.” For sanctions that might affect the energy sector – oil prices might reach $120 or more.”
Bank of America expected Brent crude to rise to $120 a barrel in the middle of this year.