Brent oil prices on Thursday surged above $105 per barrel for the first time since 2014 as Russia attacked Ukraine, exacerbating concerns that a war in Europe could disrupt global energy supplies in an already-tight market.
After Russian President Vladimir Putin authorized what he called a special military operation, Ukraine's Foreign Minister Dmytro Kuleba said in a tweet that Russia had launched a full-scale invasion of Ukraine and was targeting cities with weapons strikes.
Brent crude rose $8.24, or 8.5%, to $105.08 a barrel at 10:45 a.m. GMT. U.S. West Texas Intermediate (WTI) crude jumped $7.78, or 8.5%, to $99.88.
Brent and WTI hit their highest since August and July 2014 respectively.
"Russia is the third-largest oil producer and second-largest oil exporter. Given low inventories and dwindling spare capacity, the oil market cannot afford large supply disruptions," UBS analyst Giovanni Staunovo said .
"Supply concerns may also spur oil stockpiling activity, which supports prices," Staunovo added.
Russia is also the largest provider of natural gas to Europe, providing about 35% of its supply.
U.S. West Texas Intermediate (WTI) crude futures jumped $4.85, or 5.3%, to $96.95 a barrel, after rising to as much as $97.40, the highest since August 2014.
Oil prices have surged more than $20 a barrel since the start of 2022 as fears that the United States and Europe would impose sanctions on Russia's energy sector, disrupting supplies.
Russia is the world's second-largest oil producer, mainly selling its crude to European refineries, and is the largest supplier of natural gas to Europe, providing about 35% of the latter's supply.
"Russia's announcement of a special military operation into Ukraine has pushed Brent to the $100/bbl mark," said Warren Patterson, head of ING's commodity research.
"This growing uncertainty during a time when the oil market is already tight does leave it vulnerable, and so prices are likely to remain volatile and elevated," he added.
The United States and Europe have promised the toughest sanctions on Russia in response.
"If sanctions affect payment transactions, Russian banks and possibly also the insurance that covers Russian oil and gas deliveries, supply outages cannot be excluded," said Commerzbank analyst Carsten Fritsch.
"It's not just geopolitical risk that is the problem but the further straining of supply," OCBC economist Howie Lee said.
"Russian oil supply will disappear overnight if faced with sanctions ... and (Organization of the Petroleum Exporting Countries) OPEC can't produce fast enough to cover this gaping hole."
Some members of OPEC said there is no need for the group and its allies to increase output further as a potential deal between Iran and world powers will increase supplies. Some OPEC members are already struggling to meet current targets.
Japan and Australia said on Thursday they were prepared to tap their oil reserves, together with other International Energy Agency (IEA) member countries, if global supplies were hit by hostilities in Ukraine.
Analysts are also warning of inflationary pressure on the global economy from $100 oil, especially for Asia, which imports most of its energy needs.
"Soaring oil prices come at an especially difficult time," HSBC economist Frederic Neumann said.
"Asia's Achilles' heel remains its vast import needs for energy, with surging oil prices bound to take a hefty bite out of income and growth over the coming year."
The U.S. and Iran have been engaged in indirect nuclear talks in Vienna, in which a deal could lead to the removal of sanctions on Iranian oil sales and increase global supply.
Iran on Wednesday however urged Western powers to be "realistic" in talks to revive the 2015 nuclear deal and said its top negotiator was returning to Tehran for consultations, suggesting a breakthrough in its discussions is not imminent.
Additionally, U.S. crude stockpiles rose 6 million barrels last week while distillate stocks fell, according to market sources who were citing American Petroleum Institute (API) figures late on Tuesday.
Ahead of government data on Thursday, analysts forecast a 400,000-barrel build in crude and a drawdown in fuel stockpiles.
Gasoline inventories rose by 427,000 barrels and distillates stockpiles fell by 985,000 barrels, the API data showed according to the sources, who spoke on condition of anonymity.