Crude Soars On Russian Invasion NewsCrude prices have surged to their highest level since summer 2014 this week, extending year to date gains just over 30%. Prices have been steadily gaining over the last week despite COT data showing a reduction in long positions, with the recent pull back proving to be a short-lived correction. Prices are now up by almost 60% from the lows printed in December and show little sign of slowing down in the near term.$100 per BarrelThe main driver behind the sharp upward move we’ve seen in prices this week, is the news of Russia invading Ukraine. Crude prices jumped almost 7% overnight, touching highs of almost $100 per barrel. Uncertainty over a potential military conflict between the two countries has been a key upside driver over the year so far with price correcting lower recently amidst hopes that a conflict might be avoided. However, with Russia launching a full-scale invasion last night, oil prices have since surged higher again. The market is fearful over the impact to Russian oil supply. Given the nation’s position as the third largest producer globally, any disruption would have severe consequences for prices, which are already at elevated levels.What Next?The question for markets now is what happens next? The West is currently involved in applying sanction against Russia though, for now, the prospect of any military engagement from the West looks slim. Russia has reportedly said its aim is to demilitarize Ukraine, not occupy the country. However, the longer the conflict continues and bloodshed increases, the greater the impact we are likely to see on oil prices.IEA Considering Oil Reserves ReleaseWe have seen some moderation of the initial upside move on reports of a possible co-ordinated release of oil reserves, in a bid to counter high prices. Members of the International Energy Agency, including Australia and Japan, along with the US, said they were eyeing a release of strategic oil reserves if prices continue to rise from here.EIA Drawdown ForecastLooking ahead this week, the market will receive the latest weekly update from the Energy Information Administration later today. The EIA is forecast to report a 1 million barrel drawdown, which will be little help for crude bears. Following last week’s 1.1 million barrel drawdown, news of a further decline in stocks would give bulls another reason to stay long.Technical ViewsCrude OilThe rally in crude oil this week has seen the market breaking back above the 95.93 level and bull channel top. With RSI bullish and MACD close to crossing bullish here, the near-term outlook remains in favour of higher prices while 90.85 holds as support. To the topside, 106.05 is the next marker to note.
Source: Tickmill