Oil Soars As Russian Invasion Of Ukraine Seems Imminent

Meanwhile, the IEA forecasts unprecedented demand growth in 2022: File Image/Pixabay

The seemingly impending invasion of Ukraine by Russia coupled with yet more reports of tight supplies resulted in oil prices on Friday ending 3 percent higher – with some analysts saying prices have reached a dangerously high level.

After U.S. secretary of state Antony Blinken stating that an invasion of Ukraine could happen at any moment and even during the Olympics, Brent settled $3.03, or 3.3 percent, higher at $94.44 per barrel.

West Texas Intermediate crude rose $3.22, or 3.6 percent, to $93.10 per barrel; both benchmarks also posted their eighth consecutive week of gains.

Andrew Lipow, president of Lipow Oil Associates, said, "If an invasion appears to be imminent and you know that there will be retaliatory sanction, that will result in a disruption in natural gas and oil supplies."

Ed Moya, senior market analyst for the Americas at Oanda Corp, added, "The oil market was waiting for a major catalyst to justify a move above $100 and it seems the Ukraine situation just took a turn for the worse.

"If Russian troop movement is confirmed over the next week, crude supply disruption expectations could send oil another 10 percent higher."

Rebecca Babin, senior equity trader at CIBC Private Wealth, said, "The key consideration for crude will be what kind of sanctions the U.S. and allies move forward" should Russia invade.

Meanwhile, the International Energy Agency said it expects global demand to expand this year (partly due to a strong post-pandemic economic recovery) by 3.2 million barrels per day (bpd), reaching an all-time record 100.6 million bpd.

The IEA also noted that market volatility could be mitigated somewhat if Saudi Arabia and the United Arab Emirates – the two Organization of the Petroleum Exporting Countries members with the most spare production capacity - pumped more crude.

Toril Bosoni, head of the IEA's markets and industry division, pointed out that high oil prices are "not in the interest of consumers, but not in the interest of producers either."

Still, some analysts believe if the nuclear deal with Iran is ratified, it could tip markets into a surplus of as much as 1 million bpd in the second half and push Brent down by $10 to $15 per barrel: "An Iran deal would be a game-changer," Bank of America analysts led by Francisco Blanch wrote in a report.