Forex Analysis & Reviews: 22.02.2022 - Oil surges amid escalation...

22.02.2022 05:27 PM

Oil surges amid escalation in Ukraine

Crude oil prices have almost surpassed the key mark of $100 per barrel, following Russia's decision to send troops into the rebel-held regions in Eastern Ukraine. Moscow's move has put Eastern Europe on the brink of war,

The price of benchmark Brent crude oil has reached a 7.5-year high of $99 per barrel. The price of futures contracts with delivery in April surged by 4% to $99.31. West Texas Intermediate climbed by 3.3% to $94.47. At the time of writing, both crude oil brands retreated slightly, with Brent and WTI trading at $94.47 and $92.80 respectively.

Russia's Deputy Foreign Minister Andrei Rudenko stated that Russia recognizes the independence of the self-proclaimed Donetsk and Luhansk People's Republics "within the border they perform their duties and jurisdiction in."

Authorities of the breakaway regions have accused Ukraine of shelling numerous civilian targets within their territory since February 17. Following an escalation of tensions, both DPR and LPR announced an evacuation of civilians into Russia on February 18 and a mobilization on February 19.

Russia officially recognized Donetsk and Luhansk People's Republics on February 21, which was followed by a friendship and cooperation treaty, as well as Russian military deployment in the Donbass. According to the Kremlin, the Russian army would perform peacekeeping duties in the region.

Russia's official recognition would allow Moscow to sign military and economic treaties with DPR and LPR without Kyiv's approval.

US president Joe Biden has imposed economic sanctions against the rebel regions, prohibiting all American citizens from trading and investing there. Further sanctions against Russia by the US and the EU are likely to follow in the near future.

Traders await Russia's next move in Ukraine. If Putin does not stop in the Donbass and invades the rest of Ukraine, including its capital Kyiv, it could lead to harsh sanctions from Western nations, in spite of the possible economic impact on many European countries. Any supply disruptions caused by punitive measures against Moscow could seriously affect the EU, which is highly dependent on Russian natural gas imports amid the current energy crisis.

Amid the current political uncertainty, the psychological level of $100 could be a target for traders. However, taking profits near this level is unlikely, as oil prices are currently under influence of a potential surge in Iranian oil exports. The rebound of oil prices in the afternoon after the upsurge in the morning suggests the possibility of a diplomatic breakthrough between US and Iran is limiting the rally. Uncertainty over the extent of US and EU sanctions against Russia is also weighing down on crude oil's upward movement.

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*Disclaimer: The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

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