Yahoo Finance Oil surges past $110 sparking fears of further hikes in petrol and diesel prices
Brent crude (BZ=F) oil surged past $110 (£83) a barrel on Wednesday, its highest level since early July 2014, sparking fears that petrol and diesel prices will continue to rocket and add to the current cost-of-living squeeze.
The international benchmark climbed above $113, an increase of more than $12 since Russia first invaded Ukraine, while West Texas Intermediate (CL=F) also surpassed $111, its highest level since August 2013.
It came as the Organisation of the Petroleum Exporting Countries (OPEC) decided to stick to their plans for a modest rise in output in April despite the current conflict.
"Current oil market fundamentals and the consensus on its outlook pointed to a well-balanced market, and that current volatility is not caused by changes in market fundamentals but by current geopolitical developments," the group said in a statement.
Russian deputy prime minister Alexander Novak, who attended the talks on Wednesday, said he hoped oil market volatility would ease and that Russian output was expected to reach pre-pandemic levels in May.
Opec+ has been hiking output by 400,000 barrels per day each month since August. The next meeting is scheduled for 31 March.
Meanwhile, on Tuesday, the US, Japan, and other major consumer nations agreed to release 60 million barrels from their stockpiles in an attempt to stabilise global energy markets.
US president Biden is under increasing pressure from US lawmakers to suspend crude imports from Russia.
"We are prepared to use every tool available to us to limit disruption to global energy supply as a result of President Vladimir Putin's actions," White House spokeswoman Jen Psaki said.
She added that Washington would carry on looking at how to speed up moving energy supplies away from Russia. However, this has failed to tame the rally.
Last night, the International Energy Agency (IEA) also warned that the situation in energy markets was "very serious" and that global energy security was under threat.
“After the US and Saudi Arabia, Russia is the third largest oil producer globally with the addition of these strategic reserves paling into insignificance compared to the geopolitical supply shock from the war between Russia and Ukraine,” Victoria Scholar, head of investment at Interactive Investor, said.
“Having initially rallied to $100 a barrel less than a week ago, oil is up another 10% with $120 a barrel the next potential target if Russia continues its aggression.
Read more: Stock markets mixed as Biden declares Putin 'dictator' in State of Union address
The increase in oil prices has also piled pressure on companies and consumers, with fears that petrol and diesel will rise further as price movements are determined by the price of crude oil.
The average price of petrol reached another new record high on Tuesday with the cost of a litre now at 151.67p. Diesel has also exceeded £1.55 a litre for the first time ever at 155.23p
Simon Williams, RAC fuel spokesman, said: “The sudden $10 jump in the oil price on Tuesday to $113 a barrel is likely to take the average price of petrol towards 155p a litre and diesel to 160p, particularly as it’s looking like this price isn’t just a market blip caused by the US and allies deciding to dip into the strategic oil reserve.
"If oil does stay at this level, the journey to an average unleaded price of 155p may be far too quick.”
Meanwhile, natural gas prices have jumped for the third consecutive day.
UK wholesale gas prices are now back up 37% to 397.48p per therm, close to their peak last Autumn, while benchmark European prices rose as much as 15% to €140 a megawatt-hour after jumping 23% on Tuesday. Dutch gas futures contract jumped 39% to €169.5 per megawatt hour.
It comes amid concerns that Russia will stop gas supplies to Europe in a retaliatory measure, as well as worries about pipelines being damaged in the conflict.
The higher costs are likely to be passed on to consumers, piling even more pressure on household bills at a time of record levels of inflation.
Watch: Why are gas prices rising?
