Oil prices jumped to an eight-year high last week, amid growing fears of a Russian invasion against Ukraine. The US warned of an imminent attack against Ukraine and oil prices soared after the announcement. The US President, Joe Biden, had an hour-long discussion with his Russian counterpart Vladimir Putin on Saturday, in what was widely seen as a last-ditch effort to avert a Russian invasion of Ukraine, but it was reported that the call brought “no fundamental change” to the issue. The US State Department warned that an attack against Ukraine might take place at any time, while many countries, including the US, the UK, and Israel are warning citizens to leave Ukraine and are evacuating personnel from their embassies. Oil price benefitted from mounting geopolitical tensions and WTI rose almost to $96 per barrel on Monday.
On Tuesday, however, Russia stated that it would remove some of its troops from the Ukrainian border, in a move that was seen as an attempt to defuse the crisis. Oil prices dropped rapidly after the announcement, reaching $90.7 per barrel. NATO however expressed doubts that there was the withdrawal of Russian troops and the situation remains critical. WTI climbed early on Wednesday, reaching almost $95 per barrel, as the de-escalation of the Russia – Ukraine crisis seems as yet uncertain. WTI price plummeted later in the day, going as low as $90 per barrel. 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.
The price of oil has been increasing over the past months, as existing international inventories are at their lowest levels in seven years and supply is trying to catch up with rising demand. According to recent OPEC estimates, oil demand will reach pre-pandemic levels within the year. Even though OPEC+ has agreed to increase its output by 400,000 barrels per day, some of its member countries struggle to meet their output goal, raising doubts on whether the organization will be able to deliver the amount promised.
All eyes are going to be on the Russia – Ukraine crisis this week, as there have been hints from the US State Department that an escalation of the crisis was expected on Wednesday. If the crisis is diffused though, and the issue moves towards a peaceful resolution, oil prices might drop.
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