Uncertainty pushed oil prices up on Sunday as more Russians gathered at Ukraine’s borders.
Oil prices have been virtually flat for the past week as traders anticipated a potential nuclear deal with Iran that could allow the country to bring millions of gallons of oil to market. But as tensions mounted along the Russian-Ukrainian border, oil markets opened more than a dollar a barrel higher in evening trading.
President Biden and other senior US officials have said that Russia’s President Vladimir V. Putin has already decided to invade Ukraine, despite the threat of crippling sanctions. Any invasion would most likely interrupt Russian natural gas and oil shipments to parts of Europe and then be followed by a decline in the West’s purchases of Russian energy. Nevertheless, negotiations continued on several fronts.
The United States and many other industrialized nations will most likely release millions of barrels of oil from their strategic reserves once a significant invasion occurs. There is also talk in Washington about suspending federal taxes on gasoline. Such measures could help push prices at the pump, at least for a short time.
The average national price of a gallon of gasoline rose nearly 4 cents last week to $3.53, about 90 cents higher than a year ago. Gasoline prices at the pump usually follow global oil price trends by a week or two.
Despite the increasing potential for conflict, the US benchmark oil price fell nearly 2 percent last week, while the global benchmark price rose by less than a dollar a barrel. Both benchmarks remain above $90 a barrel, the highest level since 2014.
On Sunday evening, the US oil benchmark, West Texas Intermediate, rose nearly 2 percent to $92.73 a barrel, while the global Brent benchmark rose 1.3 percent to $94.76 a barrel.
The United States is not a major importer of Russian oil, but Russia supplies roughly one in every 10 barrels consumed by the global economy as the third largest producer after the United States and Saudi Arabia. Russian oil exports are mainly headed to Europe and Asia, and global markets remain tight as production has failed to keep up with the economic recovery from the Covid-19 pandemic.
US oil production has gradually increased in recent months and Saudi Arabia and the United Arab Emirates are believed to have additional production capacity. But it would take a nuclear deal with Iran to quickly send new barrels to global markets. Iran has as many as 80 million barrels in storage that it could sell relatively quickly and it could ramp up its production to 1.2 million barrels per day within eight months. But in a market of 100 million barrels a day, that wouldn’t solve the shortages if there is a prolonged war in Eastern Europe.
