Russia's Deployment Of "Peacekeeping Forces" Into Ukraine Pushes Oil Close To $100

However, Sen doesn't think oil at that level is sustainable: File Image/Pixabay

Washington declaring that Russia had invaded Ukraine and announcing sanctions had the predictable impact on oil prices on Tuesday, with Brent trading as high as $99.50 before pulling back slightly.

Brent ultimately gained $1.52 to settle up at $96.84 per barrel, while West Texas Intermediate ended up $1.28 at $92.35.

Jim Ritterbusch, president of Ritterbusch and Associates, said of Tuesday's trading pullback, "The market obviously pumped in excess risk premium as Russia entered the separatists' portion of the Ukraine and this fear premium gradually dissolved."

Following the leads of the U.S. and Britain against the former Soviet Union, Germany halted the $11 billion Nord Stream 2 gas pipeline project, which observers believe will help influence crude trading in the days to come.

NPR on Tuesday noted that the sanctions "could indirectly reduce Russian oil and gas sales, [and] Russia could also throttle energy exports in retaliation for sanctions.

"Any of these outcomes would take supply off the market, while also fuelling greater uncertainty, which also tends to elevate prices…..together, that would almost certainly drive prices above $100, and some Wall Street analysts are even eyeing the possibility of oil hitting as high as $150."

However, while some experts have stated that oil in excess of $100 could last for months, Amrita Sen, founder and director of research at Energy Aspects, told media she doesn't expect it to be sustained; however, she agreed that rising prices "are not a short-term phenomenon."

But given the huge surge in demand in 2022 coupled with dwindling stockpiles, supply shortage remains a primary concern, and fanning these concerns once again on Tuesday was the Organization of the Petroleum Exporting Countries (OPEC).

Specifically, Iraq and Nigeria said the cartel's strategy of gradually raising production is enough to balance the market and that there is no need to be more aggressive.

Timipre Sylva, energy minister for Nigeria, said, "We won't do anything extraordinary at this time because we are expecting at lot of production" from outside of OPEC+, and therefore there's "no need at all to bring on more barrels than the current plan."

Ihsan Abdul Jabbar, energy minister for Iraq, added, "We will not create any growth to the commercial storage; we will secure all the demand by making the required supply."

One interesting aspect of what Russian president Vladimir Putin described as "peacekeeping forces" moving into the breakaway regions of Donetsk and Luhansk in eastern Ukraine is that - according to Bloomberg -  they will be at least 450 miles from the route of the Druzhba pipeline that carries Russian oil across northwest Ukraine and into Europe; they'll also be about 100 miles from the lines that carry Russian gas.