Oil blasts through $110/bbl, as few alternatives seen to Russian supply | Reuters

Oil blasts through $110/bbl, as few alternatives seen to Russian supply | Reuters

Oil surged relentlessly beyond $110 a barrel on Wednesday, extending its rally since Russia invaded Ukraine seven days ago, on expectations that the market will remain short of supply for months to comefollowing sanctions on Moscow and a flood of divestment from Russian oil assets by major companies.

The market rallied into the close of trading on heavy volume, with global benchmark Brent crude ending the day at its highest close since June 2014, while U.S. crude's settlement was its highest since May 2011.

The oil rally has been dramatic, with Brent gaining over 15% this week alone as the West responded to Moscow's invasion with numerous sanctions, which have targeted financial transactions and banks, designed to hammer Russia's economy.

While the energy sector was not specifically targeted, the sanctions have hampered exporting capabilities from Russia, whose oil exports account for about 8% of global supply, or 4 million to 5 million barrels per day, more than any nation other than Saudi Arabia.

"It increasingly looks like the market is pricing in a supply disruption to at least part of the nearly 4 million barrels per day of oil that is sold into the U.S. and EU," said Andrew Lipow, president of Lipow Oil Associates in Houston.

Brent crude futures peaked at $113.94 a barrel during the session, before settling at $112.93, up $7.96, or 7.6%.

U.S. West Texas Intermediate (WTI) crude futures hit a high of $112.51 a barrel, and closed $7.19, or 7%, higher at $110.60.