Crude oil futures were sharply higher in mid-morning Asian trade Feb. 14 as fears of an impending Russian invasion into Ukraine carried over to the new week after US warnings sparked a $3/b jump in prices in the Feb. 11 session, reports SP Global.
The inflames tensions
Oil prices remained highly sensitive to news of inflamed tensions between Russia and Ukraine, with crude oil futures tacking on further gains in Asian trade after settling up to 3.5% higher on Feb. 11.
Over the weekend, the US issued further warnings of an impending attack on Ukraine, saying Russia might create a pretext for such an event.
“Ukraine is a crucial transit hub for oil and gas between Russia and the European Union, transporting 11.9 million mt of crude oil between them in 2021,” IG DailyFX strategist Margaret Yang said in a Feb. 14 note, citing S&P Global data. “Escalating tensions in the region may add supply constraints in an already tight market, sending prices higher.”
ING analysts Warren Patterson and Wenyu Yao said in a Feb. 14 note: “It is pretty clear that developments related to Russia/Ukraine will be crucial for price direction in the short term, not just for oil, but for broader commodity markets.”
The recent hike
The latest surge in oil prices will add further impetus for the US and other oil consuming nations to find ways to cool surging consumer prices. Iranian nuclear talks, a deal of which could add close to 1 million b/d of oil to export markets, appeared to have hit a stumbling block over the weekend.
The progress in talks
Media reports quoted a senior Iranian security official Feb. 14 that progress in the talks was becoming “more difficult” as Western powers only “pretended” to come up with initiatives, though Western powers have signaled some progress was made.
“The focus on Ukraine has distracted from a potential Iran nuclear deal. Negotiations kicked off last week, with White House Press Secretary Jen Psaki indicating a deal that addresses the concerns of all sides is in the offing,” ANZ Research analysts said in a Feb. 14 note.
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Source: SP Global