Oil Has Wildest Week on Record With Markets Rocked by War

(Bloomberg) -- Oil climbed, ending a week in which it swung by more than $20 a barrel after Russia's invasion of Ukraine roiled global markets and fueled fears of a supply crunch.

Futures in New York and London were up more than 2% Friday. The global Brent benchmark has traded in the biggest range since the launch of the futures contract in 1988 -- eclipsing the wild swings in the global financial crisis of 2008 and when demand plunged in the coronavirus pandemic. Brent was near $112, and West Texas Intermediate traded around $110.

On Friday, prices climbed after Ukrainian officials said Russian forces attacked a nuclear plant -- Europe's biggest. While the likelihood of a major disruption to Russian supply has boosted prices this week, signs that an Iranian nuclear deal may be near have added to the price volatility. 

The International Energy Agency warned that global energy security was under threat, and a planned release of emergency oil reserves by the U.S. and other major economies failed to quell supply concerns. JPMorgan Chase & Co. said global benchmark Brent crude could end the year at $185 a barrel if Russian supply continues to be disrupted, and some hedge funds are eyeing $200.

The invasion has reverberated throughout the energy sector. Global oil majors such as BP Plc, Shell Plc and Exxon Mobil Corp. are exiting Russia, buyers of its crude are seeking alternatives and shipping costs are spiking. Russia's Lukoil PJSC called for a fast resolution of the military conflict.

While official sanctions haven't been imposed on Russian energy exports, buyers are shunning the nation's crude as they navigate financial penalties. Germany and the White House oppose a ban on Russian oil imports, though U.S. lawmaker support to prohibit shipments into America is growing.

Russia's invasion of Ukraine means that fears over supply will remain front and center, said Stephen Brennock, an analyst at PVM Oil Associates in London. In other words, the sanctions noose is likely to tighten on Moscow, which can only be supportive for oil prices.

The head of the world's atomic watchdog said his trip to Tehran on Saturday could pave the way for reviving the Iran nuclear deal, a pact that would see the return of official oil exports. The OPEC producer has millions of barrels of oil stored offshore that could flow quickly into a tight market.

Brent remains in deep backwardation, a bullish structure where prompt barrels are more expensive than later-dated cargoes, signaling a tight supply-demand balance. The benchmark's prompt spread was $3.97 a barrel after touching record levels in recent days.

Against this backdrop, OPEC+ stuck with its gradual scheduled increase of supply in April during its monthly meeting Wednesday, wrapping up the gathering in record time without discussing the invasion of Ukraine. Russia is one of the key leaders of the cartel, along with Saudi Arabia. IEA Executive Director Fatih Birol said the outcome of the meeting was disappointing.

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