Oil prices jumped to an eight-year high last week, amid growing fears of a Russian invasion against Ukraine. On Monday morning, hopes of a peaceful resolution to the crisis in Ukraine were revived, amidst reports of a possible peace summit between Russia and the US, brokered by French President Emmanuel Macron. The announcement of a possible meeting between the two presidents revived hopes of a de-escalation of the crisis, putting pressure on the price of oil. WTI price dipped to $90.6 per barrel following the announcement but gained strength later in the day as doubts were expressed on whether the meeting would take place.
Hopes for a diplomatic resolution to the issue were diminished late on Monday, as Vladimir Putin signed a decree recognising the independence of the two separatist regions Donetsk and Luhansk in eastern Ukraine. Immediately afterward, he ordered Russian troops in these regions, in a ‘peacekeeping’ mission as he declared, effectively invading Ukraine. The EU, the UK, and the US have condemned the Russian President’s actions and are prepared to enforce economic sanctions on Russia. Oil price is expected to receive a boost over the next weeks, as announcements of economic and trade sanctions against Russia may create an energy crisis.
The price of oil has been increasing over the past months, as existing international inventories are tight and supply is trying to catch up with rising demand. There are reports, however, that Iran could add 900,000 barrels a day in the future if a deal with the US is struck over its nuclear program. The reported progress on the Iran nuclear deal has put pressure on the price of oil, counterbalancing the effects of the crisis in Ukraine.
Oil price traded above $95 per barrel early on Tuesday, testing the $95.8 per barrel resistance level but withdrew to approximately $93 per barrel later in the day. WTI is still trading in an uptrend, but in case the uptrend is reversed, support may be found at the $82.4 per barrel level and further down around $78.8 per barrel and $77.8 per barrel.
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