Oil nears $100 on Russia-Ukraine escalation

LONDON: Oil rose to its highest since 2014 on Tuesday after Moscow ordered troops into two breakaway regions in eastern Ukraine, adding to supply concerns that are pushing prices towards $100 a barrel.

Brent crude oil, the global benchmark, reached $99.50 per barrel, the highest level since September 2014. It pulled back to just below $98, still a gain of around 2.4 percent compared with late Monday.

"The intensifying crisis between Russia and Ukraine has raised concerns about the supply disruptions that would ensue as sanctions look set to cripple Russia, the world´s second largest oil exporter and the world´s top natural gas producer," noted Victoria Scholar, head of investment at Interactive Investor.

Tamas Varga of oil broker PVM said the potential for a rally over $100 a barrel has received an enormous boost.. "Those who have bet on such a move anticipated the escalation of the conflict."

US West Texas Intermediate (WTI) crude jumped by $2.96, or 3.3 percent, from Friday to $94.03, with the market having been closed on Monday for a public holiday. WTI also touched a seven-year high on Tuesday as it peaked at $96.

"We see the oil market in a period of frothiness and nervousness, spiced up by geopolitical fears and emotions," said Julius Baer analyst Norbert Rucker. “Given the prevailing mood, oil prices may very likely climb into the triple digits in the near term."

German Chancellor Olaf Scholz said he was suspending the Nord Stream 2 pipeline project with Russia in response to Moscow´s recognition of breakaway regions Donetsk and Lugansk.

Ukrainian President Volodymyr Zelensky had demanded an immediate halt to the project, set to pipe Russian natural gas to Germany via the Baltic Sea.

Zelensky said Russia must be punished for its recognition Monday of Ukraine´s two separatist-held regions with "immediate sanctions" that include "the complete stop of Nord Stream 2".

It comes as the United States, Britain and the European Union prepared to launch economic sanctions on Russia.

"Whatever happens next, one thing is clear: energy prices are unlikely to come back down in a hurry," said ThinkMarkets analyst Fawad Razaqzada.

"Consumers´ disposable incomes have already been stretched by surging inflation, and if oil and other energy prices continue to rise, this could hurt the economic recovery, and raise concerns about a possible recession," he added.

The jump in oil prices is compounding worries about inflation around the world, with the US Federal Reserve coming under intense pressure to tighten monetary policy to prevent prices running out of control. —AFP/News Desk