U.S. oil prices hit the highest levels in nearly eight years Monday, taking crude futures past the $95 per barrel mark and adding even more upward pressure on gas prices amid White House warnings of a near-term military conflict in the Ukraine.
President Joe Biden cautioned Russia President Vladimir Putin during a weekend phone call that the U.S. would take 'decisive' action against any military action in the Ukraine, while National Security Adviser Jake Sullivan said the U.S. would defend "every inch of NATO" in the even of a Russian invasion.
Any incursion by Russian troops -- around 130,000 of which have amassed on the border of the two eastern European states -- would result in swift and severe sanctions, some of which would affect the more than 11.2 million barrels of oil that Russia produces each day.
European gas supplies from Russia, which flow through the Ukraine, are also likely to be disrupted as a result of a military conflict, thus adding add further upward pressure on crude -- a substitute to natural gas in some energy markets -- with more analysts suggesting that $100 oil is likely in the coming weeks.
"It is pretty clear that developments related to Russia/Ukraine will be crucial for price direction in the short term, not just for oil but for broader commodity markets," said ING's head of commodities strategy Warren Patterson.
Here in the U.S., stockpiles fell to the lowest levels since October of 2018 last week, while drillers, eager to capitalize on the multi-year price peak, added the new rigs in the Gulf of Mexico in around three-and-a-half years.
The Energy Department added Monday that domestic shale oil production is set to rise by 109,000 barrels this month, to around 8.707 million barrels per day, as demand expectations accelerate.
Brent crude contracts for April delivery, the global pricing benchmark, were last seen $1.84 higher on the session at $96.25 per barrel.
WTI crude futures for March delivery, which are tightly linked to U.S. gasoline prices, were marked $2.28 higher from their Friday close and changing hands at $95.40 per barrel for the first time since 2014.
Data from GasBuddy.com, a consumer website, suggests domestic gasoline prices have risen for seven straight weeks and now average $3.47 per gallon across the country - a 36% increase from the same period last year.
“Not only are oil prices up, but the bulk of the nation is starting the multi-month transition to summer gasoline, further adding to the rise at the pump," said GasBuddy's head of petroleum analysis Patrick De Haan. "I see no other potentials in the short term but additional price increases unless Russia does an about-face on Ukraine. Even then, we’ll still see seasonality push prices up, so motorists should be ready to dig deeper.”
