Oil rises amid escalating tensions between Russia and Ukraine


Pump jacks for oil wells operated by Chevron Corp. in San Ardo, California, USA, on Tuesday, April 27, 2021.

David Pablo Morris | Mayor Bloomberg | fake images

Oil prices rose in afternoon trading on Friday amid rising tensions between Ukraine and Russia.

With about 2 hours to go until trading day, US National Security Adviser Jake Sullivan said in a white house briefing that there were signs of Russian escalation on the Ukrainian border and that an invasion was possible during the Olympics, despite speculation to the contrary.

“We continue to see signs of Russian escalation, including new forces arriving at the Ukrainian border. As we’ve said before, we’re in the window where an invasion could start at any time,” Sullivan said Friday.

Sullivan noted that the United States is not sure that Russian President Vladimir Putin has made the final decision to invade Ukraine. But “it may well happen soon,” he said. Stocks came off their lows, and oil and bond prices retreated from their trading session highs following Sullivan’s comment, which slightly offset an earlier report that had sent markets reeling.

The United States and the United Kingdom have urged citizens to leave Ukraine.

A Downing Street spokesman said Prime Minister Boris Johnson feared for the “security of Europe in the current circumstances”.

The spokesman added that Russian President Vladimir Putin “had to understand that there would be severe sanctions that would be extremely damaging to Russia’s economy, and that allies should continue efforts to strengthen and support NATO’s eastern borders.”

US West Texas Intermediate Crude Futuresthe benchmark US oil index, rose more than 5% to $94.66 a barrel, its highest level since September 30, 2014. However, the contract softened somewhat towards the close and ended the day up 3.58% at $93.10 per barrel.

International benchmark Brent crude it advanced 3.3% to settle at $94.44 a barrel, after topping $95 at one point.

“The market has been worried about this outcome for several weeks, but most believed it would not happen or at least after the Olympics,” said Rebecca Babin of CIBC Private Wealth. “The key consideration for crude will be what kind of sanctions the United States and its allies will push through” should Russia invade.

“That is what will ultimately determine how crude supply is affected,” he said. Babin added that the strong bullish move, based on speculation, speaks to how tight oil market fundamentals are right now. Rising demand coupled with low inventory and limited new supply are fueling fears in the market.

Oil prices had already risen more than 2% earlier in the session following the latest oil report from the International Energy Agency.

The firm now expects global demand to hit a record 100.6 million barrels a day this year as covid restrictions ease.

“Everyone’s worst fears may be in the process of being realized,” said John Kilduff of Again Capital. “We’ll see, but a lot of energy supplies are at stake.”

– CNBC’s Kevin Breuninger contributed reporting.


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