Financial Insights

Oil prices inch closer to $100 per barrel amid Ukraine-Russia tensions

The international benchmark of oil Brent rose upto $99.50 per barrel, a 7-year high, as traders felt the possibility of supply from Russia getting disrupted amid the crisis with Ukraine. It settled at $96.84 per barrel, 3.5% up from the previous day.

US stocks fell as the S&P 500 index fell into correction when President Putin ordered his army into eastern Ukraine. The president ordered his troops into the rebel held areas of Donetsk and Luhansk which lie on the eastern side of Ukraine. This prompted Germany to stop the approval of the Nord Stream 2 natural gas pipeline. Several western nations have imposed heavy sanctions on Russia. The DOW closed down nearly 483 points or 1.4% down yesterday.

But what is Russia’s issue with Ukraine? Putin has described Russia and Ukraine as ‘one nation’. He declared the collapse of the Soviet Union as a ‘disintegration of historical Russia’. Russia had also annexed the peninsula Crimea, which belonged to Ukraine, in 2014. However, the current issue is Russia’s desire to prevent Ukraine’s admission into the North Atlantic Treaty Organization (NATO). Russia is threatened by NATO’s expansion in the region since the late 1990s as the organization now consists of 30 members. Russia is asking for a guarantee from the West that Ukraine will never be a part of NATO and for NATO to stop expanding in the region.

An invasion by Russia would affect the energy supply around the world as Russia is one of the world’s largest producers of oil and natural gas, having around 17% of the world’s natural gas and 12% of the world’s oil supply. Russian energy minister Nikolai Shulginov said in an interview that the optimal price for oil is $55-70 per barrel.

Highlight by Aman Agarwal.

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