Oil Tops $100 after Russia Declares War, Invades Ukraine

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON, D.C. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange surged more than 8% overnight in reaction to Russian President Vladimir Putin's declaration of a "special military operation" against Ukraine, a former Soviet state that had sought membership in the North Atlantic Treaty Organization in defiance of Russia's objections, with reports indicating explosions and missile attacks in a number of Ukrainian cities, including the capital Kiev.

At 5 AM Moscow time, Putin addressed the Russian people in an unscheduled televised appearance to inform the nation that he ordered a military attack against its neighbor to "de-militarize and de-nazify" its leadership. Shortly after, blasts and missile strikes were reported in Kyiv, which has a population of 3 million, Kharkov, the industrial center of eastern Ukraine with a population of 1.5 million, and Odessa, the port city on Black Sea with a population of 1 million. Overnight reports paint a picture of mass casualties across Ukraine.

Putin claimed Russia doesn't seek to occupy its ex-Soviet satellite but said there must be a fundamental change in its leadership and elites, calling it a threat to Russian security and existence.

In his address to the nation, he blasted U.S. and NATO leadership for its "irresponsible" decision to move its military infrastructure towards Russian borders.

Putin's attempt to redraw the map of Europe could lead to the most devastating conflict on the European continent since World War II. It could cost thousands of civilian lives and create hundreds of thousands of refugees fleeing the violence in Ukraine.

Furthermore, Putin's long-feared assault will reverberate far beyond Ukrainian borders. It will bring painful economic consequences for American and European consumers that are already struggling with spiking prices for gasoline and food. Russia is the world's leading exporter of wheat, with Ukraine the third largest exporter of the global staple food. Combined Russia and Ukraine account for 25% of global wheat production.

Russia remains one of the world's largest and most influential crude oil producers in the world. Alongside Saudi Arabia, Moscow leads a group of 23 oil exporters known as OPEC+, which has gradually boosted global production to meet soaring demand. Russia alone exports 7.5 million bpd of crude and petroleum products, with 2.3 million bpd of those volumes destined for Western Europe and the United States. It is also the single biggest exporter of natural gas.

Earlier this week, Biden administration said it is once again building the case for a globally coordinated crude stockpile release to cool off the prices. In November, Biden ordered a release of 32 million bbl from the Strategic Petroleum Reserve when Brent crude traded above $70 bbl to lower oil prices that dovetailed with a previously and congressionally approved 18 million bbl SPR release.

The SPR held 584.8 million bbl of crude oil on Feb. 11, the lowest level for the emergency reserves since September 2002. Meanwhile, commercial crude oil inventories in the United States are also low at 411.508 million bbl -- about 10% below the five-year average.

Near 7:30 AM ET, NYMEX West Texas Intermediate for April delivery traded $6.40 higher at $98.54 bbl, and international benchmark Brent jumped above $100 bbl, up $7.19. March RBOB futures added 15.5cts to $2.8803 gallon, and front-month ULSD futures gained 17.38cts to $3.0030 gallon.

Liubov Georges can be reached at liubov.georges@dtn.com

Liubov Georges