The United States’ benchmark, the West Texas Intermediate (WTI) just hit a $100 per barrel mark, for the first time since July 2014, as Russian President, Vladimir Putin authorized a special military operation on Ukraine. The WTI is up over 8% as of the time of this writing.
As previously mentioned, Russian President Vladimir Putin announced a “special military operation” against Ukraine early on Thursday morning after recognizing the separatist regions of Lugansk and Donetsk earlier in the week. This drew the anger of the West and they have promised serious sanctions against Russia.
Ukrainian Foreign Minister Dmytro Kuleba stated that Putin had “launched a full-scale invasion of Ukraine.” However, the Russian President says Russia is merely protecting the citizens of eastern Ukraine after the United States ignored Russia’s request to keep Ukraine from entering NATO.
What you should know
There are reports of missiles falling on Ukrainian cities, with explosions near Kyiv, and Ukraine is reporting that columns of troops are flooding into eastern Ukraine. Russia has also landed by sea in Odesa and Mariupol.
Ukraine has said that military command centres have been hit. Putin said his goal was not to occupy Ukraine. Ukraine has declared martial law, with Ukraine president Volodymyr Zelenskiy calling on Ukrainians to defend the country on the cities’ streets and offering to arm any citizens willing to join the fight.
Warren Patterson, head of ING’s commodity research gave his take on the current Russian-Ukraine spat. He stated, “Russia’s announcement of a special military operation into Ukraine has pushed oil prices to the $100/bbl mark. 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.”
Western nations and Japan on Tuesday punished Russia with new sanctions for ordering troops into separatist regions of eastern Ukraine and threatened to go further if Moscow launched an all-out invasion of its neighbour. However, these countries have been careful to not impose sanctions on energy trade.
OCBC economist Howie Lee stated, “It’s not just geopolitical risk that is the problem but the further straining of supply. Russian oil supply will disappear overnight if faced with sanctions … and OPEC can’t produce fast enough to cover this gaping hole.”
The global benchmark, the Brent oil futures has traded as high as $105 today. Both benchmarks have, however, retraced below the $100 trading zone.