Brent oil price tests $118 per barrel as supply bottleneck remains

A working oil pumpjack (Representative image)

Brent oil prices tested $118 a barrel on March 3 as trade disruption and transportation challenges caused by Russian sanctions over the Ukraine crisis stoked supply concerns, while US oil stocks plunged to multi-year lows.

Despite the price increase, the Organization of Petroleum Exporting Countries (OPEC) and its allies, including Russia, have opted to maintain a 400,000 barrel per day increase in output in March, ignoring the Ukraine conflict during their negotiations and dismissing consumer demands for additional petroleum.

Brent crude futures tested $118 per barrel, the highest level since August 2013.

US West Texas Intermediate crude was trading at $113.01 a barrel, up $2.41 from its 11-year high of $113.31.

The market was reacting to the United States' newest round of sanctions against Russia's oil refining industry, which fuelled fears that Russian oil and gas exports may be next.

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As the Biden administration considers the effects on global oil markets and US energy prices, it has so far refrained from imposing sanctions against Russia's oil and gas exports.

According to the International Energy Agency, Russia is the world's third largest oil producer and the largest exporter of oil to global markets. According to the agency, Russian crude and oil product exports reached 7.8 million barrels per day in December.

Meanwhile, oil inventories in the United States continued to fall. The tanks at the important Cushing, Oklahoma oil hub were at their lowest level since 2018, while strategic reserves in the United States fell to a near 20-year low.