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Crude Oil Prices Jump as Russia Attacks Ukraine, Fighting May Be Brief

Crude Oil Prices Jump as Russia Attacks Ukraine, Fighting May Be Brief

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  • Crude oil prices soar to 8-year highs as Russia attacks Ukraine, threatening supply
  • Mirroring 2008 Russo-Georgian War may mean the fighting is relatively short-lived
  • Risk-off flows likely to remain near-term, WTI on pace to challenge $100/bbl figure

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Crude oil prices raced higher as Russia attacked Ukraine, driving a violent risk-off move across global financial markets and stoking energy supply disruption fears. Russia is the world’s third-largest exporter of oil and the largest producer of natural gas. About a third of that gas output flows through Ukraine.

The WTI benchmark is testing above the $97/bbl figure while the Brent contract has extended above the $100/bbl mark for the first time since mid-2014. A Bloomberg index of energy commodity prices including crude, gasoline, heating oil and natural gas jumped to the highest in over 3 years.

Asia-Pacific stock exchanges shed nearly 2 percent after news of Russia’s incursion and the subsequent outrage from the international community, with loud promises of retaliatory sanctions from the EU and the US. European markets are down over 3 percent in early trade and US index futures point sharply lower.

This hints that headlines tracking the crisis are likely to remain in focus for now, helping to sustain crude's upward momentum. Nevertheless, stark similarities between the current episode and the 2008 Russo-Georgian war hint that acute instability may give way to an uneasy simmer relatively quickly.


In that engagement, Russia was content to establish a buffer zone between it and Georgia by way of providing military cover for the secession of two breakaway territories, Abkhazia and South Ossetia. Once Moscow effectively destroyed its neighbor’s ability to militarily resist that outcome, it pulled its troops back.

Something similar may now be in play with the separatist Luhansk and Donetsk regions in eastern Ukraine. The Kremlin appears to be acting to prevent Kyiv from resisting their becoming would-be autonomous buffer areas. Once that goal is achieved, fighting at scale may cease. In Georgia, this took two months.

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WTI is testing above resistance in the 95.34-82 area marked by the mid-February swing top and the 23.6% Fibonacci extension. A daily close above this barrier may set the stage for a test of the $100/bbl figure. Alternatively, a reversal back into this month’s choppy range sees key support begin at 87.46.

WTI crude oil price chart

Crude oil price chart created using TradingView


--- Written by Ilya Spivak, Head Strategist, APAC for DailyFX

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter

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