Energy prices surge to records as OPEC refuses to boost supply amid Russia crisis

The Organisation of the Petroleum Exporting Countries had a choice to make in early March 2022, and it chose to do almost nothing. While crude oil and natural gas prices climbed to levels not seen before, OPEC stuck to its existing plan to increase supply gradually, at a measured pace that satisfied no one watching the market seize up. The group's reasoning was straightforward enough: geopolitics, not the actual mechanics of supply and demand, were driving prices skyward. It was an argument that sounded increasingly hollow.

Russia's invasion of Ukraine had set off a cascade of consequences that OPEC seemed unwilling to acknowledge. Buyers were walking away from Russian oil. Divestiture movements were accelerating. Russian export volumes were collapsing not because of any formal embargo but because companies and countries were choosing to step back. Helima Croft, head of global commodity strategy at RBC Capital Markets, watched this unfold and saw the contradiction plainly: OPEC could claim geopolitics were the culprit, but that argument would strain credibility as Russian barrels disappeared from the market through a buyers' strike that was gathering momentum.

Mexico's energy minister, Rocio Nahle, tried to raise the subject of Russia during OPEC's deliberations. Other members moved quickly past it. Meanwhile, in Washington, President Joe Biden was signalling openness to sanctions on oil and gas imports, and those comments alone were enough to ignite European energy markets. Dutch TTF gas futures jumped as much as 60 percent, reaching €194.72 per megawatt hour—a record. JPMorgan had suggested just the day before that a complete cutoff of Russian gas would push prices above €200 per megawatt hour. The market was already pricing in scenarios that seemed unthinkable weeks earlier.

Morgan Stanley, reassessing its forecasts, raised its near-term oil price expectations. Brent crude was now expected to average $110 a barrel in the second quarter, up from a previous forecast of $95. West Texas Intermediate was projected at $107.50 a barrel for the same period, up from $92.50. The firm attributed the shift to a risk premium introduced by events in Ukraine—a premium that would likely persist for months. For the remainder of the year, both benchmarks were expected to hold at elevated levels: Brent at $100 a barrel, WTI at $97.50.

Some analysts had hoped that a nuclear deal with Iran might provide relief, allowing Iranian oil back onto the market. But Iran could only ramp up production to roughly 3.3 million barrels a day by December. Russia, by contrast, exports 5 million barrels daily. Iran could not fill that gap. The International Energy Agency released 60 million barrels from global stockpiles—a move that markets largely ignored. Sixty million barrels amounted to less than six days of Russian output. It was a gesture, not a solution.

Without a diplomatic settlement between Ukraine and Russia—a prospect that seemed to be receding rather than approaching—energy markets would remain under pressure. Relief could come from further releases of strategic reserves or from Saudi Arabia breaking with OPEC+ to increase production. But Croft saw the trajectory differently. The military crisis was deepening, not moving toward an off-ramp. Markets should prepare for the possibility of industrial curtailments and further economic disruption. The energy shock was not a temporary spike; it was a structural problem with no easy exit.