Oil prices jumped on Thursday, with Brent rising above $105 a barrel for the first time since 2014, after Ukraine crisis exacerbated concerns about disruptions to global energy supply.
Analysts are warning of inflationary pressure on the global economy from $100 oil, especially for Asia, which imports most of its energy needs.
Brent crude rose $8.24, or 8.5 per cent, to $105.08 a barrel. US West Texas Intermediate (WTI) crude jumped $7.78, or 8.5 per cent, to $99.88.
Brent and WTI hit their highest since August and July 2014, respectively.
As a result, the cost of energy in Bangladesh, which is gradually leaning towards import dependence, will also increase.
An official said Bangladesh Petroleum Corporation (BPC) is losing around taka 14 to 15 crore every day on diesel. If the crisis intensifies, oil prices could rise further. BPC is expressing fears that the losses will increase further.
However, the government already increased the retail price of diesel and kerosene by Tk 15 a litre in November last year due to the rise in their prices in the international market, resulting in a hike in transport fares and commodity prices.
The global oil market is going through an inadequate supply against high demand as the global economy recovers from the coronavirus pandemic.
The International Energy Agency raised its 2022 demand forecast and expects global demand to expand by 3.2 million barrels per day (bpd) this year, reaching an all-time record 100.6 million bpd.
"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," said UBS analyst Giovanni Staunovo.
"Supply concerns may also spur oil stockpiling activity, which supports prices." Russia is also the largest provider of natural gas to Europe, providing about 35 percent of its supply.
Underscoring the tight market, premiums on crude contracts for loading in one month over contracts for loadings in six months, a metric closely watched by traders, hit a record high at $11.55 a barrel.
"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," said Warren Patterson, head of ING's commodity research.
Analysts believe that Brent is likely to remain above $100 a barrel until significant alternative supplies become available from OPEC, US shale or Iran, for example.
The US and Iran have been engaged in indirect nuclear talks in Vienna that could lead to the removal of sanctions on Iranian oil sales.
