Oil relentlessly marched higher beyond $110 a barrel on Wednesday, responding to a flood of divestment from Russian oil assets by major companies and expectations that the market will remain short on supply for months to come.
The market’s surge has been dramatic, with global benchmark Brent crude gaining 11 percent this week alone after Russia invaded Ukraine and the West responded with numerous sanctions designed to hammer Russia’s economy.
While the energy sector was not specifically targeted, the sanctions, which have targeted financial transactions and banks, have hampered exporting capabilities from Russia, which ships 4 million to 5 million barrel of oil worldwide every day, more than any nation except Saudi Arabia.
“The sanctions on individuals and financial institutions have led the oil industry and other government entities to a de facto ban on Russian oil purchases,” said Andrew Lipow, president of Lipow Oil Associates in Houston, Texas in the United States.
Global benchmarks were off earlier highs after Brent hit its highest level since 2014 while US crude surged to a peak not seen since 2011.
Brent crude futures peaked at $113.94 a barrel before easing to $110.58 by 1:07 pm EST (17:07 GMT), up to $5.61 or 5.3 percent. US West Texas Intermediate (WTI) crude futures hit a high of $112.51 a barrel, and were last up $5.05, or 4.9 percent, to $108.46.
Both benchmarks pulled back after US Federal Reserve Chair Jerome Powell said the US central bank would boost interest rates several times to quell inflation.
