Crude oil prices continued to rise Feb. 22 as Russia deployed troops into breakaway sections of eastern Ukraine and the US and other NATO members launched an initial barrage of sanctions against the country.
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US President Joe Biden said Feb. 22 that Russia's actions marked the beginning of an "invasion," as he announced some financial banking and sovereign debt sanctions against Russia and the effort with Germany to suspend the Nord Stream 2 natural gas pipeline.
However, crude prices remained tempered as talks continued to work toward a restored Iranian nuclear deal, including potential prisoner exchanges with the US. The Russia-Ukraine situation has helped to expedite a potential Iran deal to bring more crude oil onto the global market.
After larger gains earlier in the day, NYMEX March WTI still rose $1.28/b to settle at $92.35/b and ICE April Brent was $1.45 higher at $96.84/b.
As for refined products, NYMEX March RBOB jumped 4.12 cents to settle at $2.7108/gal and March ULSD was 3.73 cents higher at $2.8188/gal.
"The oil price rally has hit a tentative wall as Ukrainian tensions cannot overcome the prospects of additional Iranian supply and possibly more crude output from OPEC+," said Edward Moya, senior market analyst with OANDA. "Energy traders are looking at a long list of geopolitical risks and see the Biden administration being extra motivated to make a deal with Tehran."
Crude prices remain on their way toward the $100/b threshold, but it might take a full Ukrainian invasion by Russia for that breakout to happen, Moya said. "The deployment of Russian troops to two regions in Ukraine and prospects of various sanctions against Russia will likely lead to further tense moments in the coming days," he added.
Russia said its deployment was of "peacekeeping" troops into the breakaway, separatist-controlled Ukrainian provinces of Donetsk and Luhansk. But NATO said declaring those regions as independent and sending troops in represented the beginning of a potentially much larger invasion.
Talks of additional sanctions
The US also is said to be working on export controls on microchips and other technologies with a group of Asian countries, including Japan, Singapore and Taiwan, all of which are concerned about China potentially watching to see how much annexation Russia can get away with.
Stricter sanctions will depend on what happens next in the standoff, said Paul Sheldon, chief geopolitical adviser for S&P Global Platts Analytics.
"Anything less than an overt military incursion would depend on the circumstances," he added.
German Chancellor Olaf Scholz said earlier Feb. 22 that the Nord Stream 2 gas pipeline from Russia could not now be certified after Russian President Vladimir Putin late-Feb. 21 publicly recognized eastern Ukraine's Donetsk and Luhansk regions as breakaway states.
While sanctions against Russia's oil industry -- a key supplier of crude oil and products to Europe -- are not yet off the table, Platts Analytics did not expect the US to impose secondary sanctions on Russian oil customers, with the West "unlikely to jeopardize such large volumes," Platts Analytics said.
In the short term, "given that these [sanctions to be announced today] will target separatists rather than Russia, it should have no impact on energy flows. As has been the case for several weeks now, Russian developments will be key for determining price direction in the near term," ING Bank's Head of Commodities Strategy Warren Patterson and Senior Commodities Strategist Wenyu Yao said in a daily note.
Russian pipeline operator Transneft said Feb. 22 it expects no changes in crude volumes transported to Europe, while Russia intends to continue uninterrupted supplies of gas and LNG to global markets, Putin said Feb. 22 in his address to the Gas Exporting Countries Forum summit in Doha.