Oil prices spiked 5 percent Wednesday after disruptions to Kazakh crude exports and growing apprehension regarding European Union sanctions on Russian energy imports as the U.S. president meets with counterparts on the continent amid worsening conflict in Ukraine.
Brent has since stabilized after opening Thursday at $117.20 a barrel and trading at $117.58 as of 6:13 a.m. EDT. Wednesday’s rally was driven mostly by adverse climate-related supply disruptions at the Caspian Pipeline Consortium (CPC) pipeline and the aftereffect considerations of sanctions on energy-dependent Europe.
The CPC supplies around 1.2 percent of global demand or 1.2 million barrels per day (bpd) while Russia exports 4–5 million bpd, the second-largest crude exporter in the world after Saudi Arabia.
Analysts are worried about how supply deficiencies could be mitigated if further sanctions are placed on Russia. Saudi Arabia has maintained its stance regarding increasing oil output and claimed that the country bears no responsibility for global shortages considering the recent attacks by Iran-backed Houthi rebels on its refineries. The Arab state has so far resisted calls from the Biden administration to increase oil production.
New hopes on an Iran deal have contributed to prices moving up further. Speaking to reporters on Wednesday, the Iranian Foreign Minister Hossein Amirabdollahian said that Iran and the west were “closer to an agreement in Vienna than ever before.” Negotiators in the Austrian capital claim that there are still issues pending that need to be resolved before finalizing an agreement.
The U.S. West Texas Intermediate futures fell from Wednesday’s high of $116.13 to trade at $113.14 before setting at $114.90. Iran has reportedly begun preparations for ramping up crude exports and has started talks with former customers like India and South Korea.
The Ukraine war has put additional pressure on already-congested global supply chains which has resulted in product shortages and a rise in prices around the world. Combined with wheat and other staple deficiencies brought about by the ongoing conflict, prices for everyday items are expected to keep on rising, adding to inflationary woes.
Money flow from investors is moving away from European markets and heading toward the United States, according to Huw Roberts, head of analytics at Quant Insight.
The U.S. dollar has gained in strength following hawkish remarks from the Fed and the rise in oil prices. EUR/USD is currency trading at 1.0989, a decline of over 1.2 percent from a March 17 monthly high of 1.1131.
The euro has weakened primarily due to continuing uncertainties on the continent as the Ukraine war carries on without an end in sight and energy sanctions which will have a considerable impact on European economies.
The Russian ruble strengthened its position over the dollar as President Vladimir Putin called for gas payment in rubles from “unfriendly” countries. After trading at over 105 rubles per dollar, it is currently trading at 96 rubles.
GBP/USD has been on a downward trend since February, and is trading at 1.3188, a decline of 0.76 percent from Wednesday’s high of 1.3289. A 30-year high inflation at 6.2 percent year-over-year has called for the UK government to resort to cutting taxes for workers and duty on fuel. Burgeoning energy costs and high prices have squeezed household budgets across the region.
Gold has climbed from $1,938.76 and is trading at $1,946.39 as multi-year-high 10-year U.S. Treasury yields resisted the further rise in price.
Bitcoin increased in value by more than 1.5 percent on Wednesday and is currently trading at $43,048.
