Oil relentlessly marched higher beyond $110 a barrel today, responding to a flood of divestment from Russian oil assets by major companies and expectations that the market will remain short of supply for months to come.
The market's surge has been dramatic, with global benchmark Brent crude gaining 11% 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 barrels of oil worldwide every day, more than any nation other than Saudi Arabia.
"The current realistic scenario is that a large portion of Russian crude oil, as well as refined oil products, will no longer be palpable to the market and create a supply deficit for the duration of the armed conflict," said Rystad Energy analyst Louise Dickson.
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 $110.09 by 1708 GMT, up $5.12 or 4.9%.
US West Texas Intermediate (WTI) crude futures hit a high of $112.51 a barrel, and were last $4.64, or 4.5%, higher at $108.05.
Both benchmarks pulled back after US Federal Reserve Chair Jerome Powell said the central bank would boost interest rates several times to quell inflation.
"Demand destruction - through still higher prices - is now likely the only sufficient rebalancing mechanism," said Goldman Sachs analyst in a note.
Relief in the form of more supply is unlikely in the near-term. The Organization of the Petroleum Exporting Countries and allies - which include Russia - stuck to their long-term plan to boost output by just 400,000 barrels per day at a brief meeting on Wednesday.
Even as OPEC+ has increased output for the last several months, producers are routinely falling short of their targets, widening a gap that can only be filled by dipping into stockpiles.
Current worldwide demand has roughly reached pre-pandemic levels, and there is inadequate supply, causing large countries to dip into their stockpiles to make up for the shortfall.
Refiners and other buyers of oil are scrambling. Prominent grades of crude oil traded worldwide, such as those in the North Sea and the Middle East, are at record premiums above Brent. At the same time, the key Russian Urals grade is being discounted at $18 lower than the benchmark - and prospective sellers are still finding little interest in Russian oil.
Adding fuel to the fire, the White House on Wednesday said it was "very open" to the possibility of targeting Russian oil-and-gas with sanctions. That could drive prices even higher, analysts said, until consumers start to balk at the rising costs.
However, National Economic Council Deputy Director Bharat Ramamurti later on Wednesday said the administration does not want to target the Russian energy sector for now.
Russian oil exports account for about 8% of global supply.
Trade in Russian oil was already in disarray as producers postponed sales, importers rejected Russian ships and buyers worldwide searched elsewhere for crude as Western sanctions and pullouts by private companies squeezed Russia.
Numerous global oil majors announced plans to divest of their Russian investments, including Exxon Mobil, BP and Shell. On Wednesday, merchant trader Trafigura said it had frozen its investments in Russia, one day after Exxon said it would exit Russian oil-and-gas operations.
US oil inventories continued to decline, meanwhile. The key Cushing, Oklahoma crude hub's tanks are at their lowest since 2018, while the U.S. strategic reserves dropped to a near 20-year low - and that was before another release announced by the White House on Tuesday in tandem with other industrialised nations.
That release of 60 million barrels of oil agreed on Tuesday by International Energy Agency member countries failed to reassure the market - as prices rose after the announcement.
"Given the 100 million bpd oil demand market, 60 million barrels satiates slightly over half a day of demand...and barely gets the market past lunchtime," wrote RBC Capital Markets analyst Michael Tran.