Oil prices rose more than 2 percent on Wednesday after Russian President Vladimir Putin announced a partial military mobilization that escalated Ukraine’s civil war and raised concerns about falling oil and gas supplies.
After losing $1.38 the day before, Brent oil futures increased $2.28, or 2.5%, to $92.90 a barrel at 0707 GMT. U.S. West Texas Intermediate crude was up $2.22 or 2.6% at $86.16 per barrel.
Putin, who says he is defending Russian territory and that the West is trying to destroy the country, said he had signed a decree for partial mobilization starting Wednesday. According to Warren Patterson, the director of commodities research at ING, the escalation will result in greater uncertainty over the Russian energy supply. He said that the measure might prompt demands for the West to take more tough sanctions on Russia.
Oil Surge Continues
Following the outbreak of the Ukraine war, oil skyrocketed and reached a multi-year high in March. On December 5, European Union restrictions prohibiting the purchase of Russian oil by ship will go into effect. Founder of Singapore’s Vanda (NASDAQ: VNDA) Insights Vandana Hari stated that It appears like a knee-jerk reaction to a fragment of news and would be vulnerable to additional recalibration in the following hours.
The probability of Iranian crude oil re-entering the global market has decreased. The US told the UN General Assembly this week that it does not expect progress on renewing the 2015 nuclear deal with Iran. The OPEC+ are now falling 3.58M barrels per day, or around 3.5% of the world’s demand, short of their production goals. The shortage draws attention to the market’s fundamental supply constraints.
This week, investors have been preparing for another rash interest rate increase from the U.S. Fed, which they worry might trigger a recession and sharply lower fuel consumption.