Oil prices reached a new high in more than seven years on Wednesday, thanks to the persistent crisis on the Ukraine border and some worrying indicators in the US stockpile report.
The price of a barrel North Sea Brent for March delivery gained 1.99% to finish at $89.96. Earlier it topped $90 for the first time since October 2014, hitting $90.47.
the barrel of West Texas Intermediate (WTI) for March, meanwhile, gained 2.04% to 87.35 dollars, although it reached 87.95 dollars during the day.
“The market integrates the risk of new geopolitical episodes on the Russian-Ukrainian border,” Bart Melek, head of commodity strategy at TD Securities, said in a note.
In a letter delivered to Russia on Wednesday, U.S refused to rule out an accession of Ukraine NATO, the main Russian demand to reach a solution to the crisis.
A meeting of Russian, Ukrainian, French and German negotiators in Paris on Wednesday made no concrete progress.
The report of reserves in the United States did not reassure the market either.
Commercial crude oil stocks in the United States rose much more than expected last week, according to figures released Wednesday by the US Energy Information Agency (EIA).
In the week ending January 21, crude stockpiles rose 2.4 million barrels (mb), more than double what analysts had expected for a million-barrel increase, to stand at 416.2 mb.
But “if we didn’t have the strategic reserves, this would look worse,” said Bill O’Grady of Confluence Investment Management.
Strategic reserves were down 1.2 mb in the week ending January 21.
The “other factor” that made operators react “is that production is down,” said Bill O’Grady. The volume went from 11.7 million barrels per day (mbd) per day to 11.6 mbd, far from its pre-pandemic level of 13 mbd.
“We’re in a strange world where prices go up but they don’t drive production up,” O’Grady summed up, “so the only way we’re going to balance the markets is by reducing consumption.”
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