Oil price accelerates and passes US$ 110, highest value in eight years

Global benchmark oil prices rose above $110 per barrelhitting an eight-year record as concern grew that Russia’s increasing economic isolation since the invasion of Ukraine would disrupt global energy supplies.

The latest increase occurred even after members of the International Energy Agency (IEA) agreed on Tuesday to release supplies from their oil reserves and despite efforts by Western governments to exclude oil and gas from their sanctions on Russia.

“The sheer magnitude of supply at risk of disruption means that even a decent chunk of reserves being released may not have an effect,” said Daniel Hynes, senior commodities strategist at ANZ in Sydney.

Refineries refuse to buy Russian crude, while banks refuse to finance commodity shipments from the Eastern European country, according to oil executives, bankers and traders.

Foreign energy companies are also pulling away from the country: Shell plans to exit its joint ventures with Russian energy giant Gazprom, and BP plans to divest its nearly 20% stake in Russian state oil producer Rosneft.

By late Wednesday morning Hong Kong time, Brent crude futures for May were 5.5% higher at $110.72 a barrel, FactSet data showed.

The rise took Brent’s gains this year to around 42% and put the international oil benchmark on track to settle at its highest level since July 2014.

The US equivalent, West Texas Intermediate, also jumped. Most-traded WTI contracts rose about 5.1% to $108.65.

Oil and gas stocks rose in Asian trading, with Australia’s Woodside Petroleum Ltd. up more than 5% and Japan’s Inpex Corp. up nearly 8%.

Rising commodity prices could force the Federal Reserve, which is already facing inflation at a 40-year high, to accelerate interest rate hikes this summer, potentially raising the risk of a recession. in the next year.

A rule of thumb states that a $10 rise in the price of a barrel of oil increases overall US inflation by 0.4 to 0.5 percentage point.

Russia is a major supplier of oil and natural gas and a major player in some other commodities, including various metals.

Elsewhere in global markets, US stock futures rose modestly, suggesting equities may recover some of the previous day’s losses later on Wednesday. Asian stock indices were mostly negative.