Russia – Ukraine War Could Send Oil Skyrocketing Over $100

U.S. West Texas Intermediate and international benchmark Brent crude oil futures are edging lower early Tuesday as some traders booked profits while assessing the potential impact of a war between Russia and Ukraine on supply.

Meanwhile, as hedge funds lightened up on the long side, analysts at JP Morgan were forecasting $125 a barrel oil in the second quarter. Not necessarily on a Russian attack, but on tight supplies.

At 06:59 GMT, April WTI crude oil futures were trading $92.97, down $0.53 or -0.57% and April Brent crude was at $96.05, down $0.43 or -0.45%. On Monday, the United States Oil Fund ETF (USO) settled at $66.33, up $0.59 or +0.90%.

Supported by Russia-Ukraine Concerns

WTI and Brent crude oil futures edged closer to $100 a barrel on Monday on fears that Russia, one of the world’s largest oil and gas producers, could invade Ukraine any day now.

In response to the threat, Ukraine’s president declared a “day of unity” for February 16, a date that some Western media have cited as a possible start of a Russian invasion.

“The market remains hyper-sensitive to the developments over the Russian/Ukraine situation,” said John Kilduff, partner at Again Capital in New York. “This is now intensifying to a terrific degree. Right now, it’s buy now, ask later.”

Ukrainian President Volodymyr Zelenskiy called on Ukrainians to fly the country’s flags from buildings and sing the national anthem in unison on February 16.

Ukrainian officials stressed that Zelenskiy was not predicting an attack on that date, but responding with skepticism to foreign media reports. Several Western media organizations have quoted U.S. and other officials citing the date as when Russian forces would be ready for an attack.

Adding to the bullishness were comments from France’s foreign minister who said on Monday that everything was in place for Russian forces to invade quickly in Ukraine, adding that Europe was ready to impose massive sanctions if it happened.

“If the question is are there elements in place so that there is a major offensive by Russian forces in Ukraine, then yes it’s true. It’s possible and quickly,” Jean-Yves Le Drian told France 5 TV.

Short-Term Outlook

The Russia – Ukraine situation is the main focus for traders at this time so Tuesday’s American Petroleum Institute’s (API) and Wednesday’s U.S. Energy Information Administration’s (EIA) weekly inventories reports are likely to be downplayed.

Ahead of today’s trade, the United States sees no “tangible sign” of de-escalation of Russian forces on the Ukraine border, the U.S. State Department said. A war is likely to cause a disruption of oil flows from the region that could send Brent and WTI prices skyrocketing far above $100, in a market already facing tight supply and rising demand.

However, traders aren’t chasing this news at this time because it remained unclear whether Russia was interested in pursuing a diplomatic path, according to the State Department.