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Oil prices approach $100 per barrel for first time in 7 years after US relocates its Ukraine embassy due to threat of Russian invasion

Alex Reyes, 28, began filling his work truck and stoped when he noticed the prices on the large marquee as drivers select from various fuels priced near of above over $6 dollars at a Shell gas station located at South Fairfax, West Olympic and San Vicente Blvd in Los Angeles

Al Seib/Los Angeles Times/Getty Images

  • Oil prices surged 2% on Monday and approached $100 per barrel for the first time since 2014.
  • The spike in oil prices came after the US said it would temporarily relocate its embassy in Ukraine.
  • Russia has been surrounding Ukraine with armed forces, and US intelligence has warned of a potential invasion.

Oil prices surged on Monday, extending the commodity’s months-long rally as the threat of Russia invading Ukraine grows.

Brent and West Teas Intermediate oil futures jumped as much as 2% to about $96 in Monday trades, closing in on the $100-per-barrel level for the first time since 2014. The midday rally came after Secretary of State Anthony Blinken said the US would temporarily relocate its embassy in Ukraine to Lviv, a town close to Poland’s border, and out of Kiev, the capital of Ukraine.

The embassy relocation came “due to the dramatic acceleration in the buildup of Russian forces,” Blinken said. In recent weeks, Russia has surrounded Ukraine’s borders with armed forces and equipment, including tanks. Much of Russia’s discontent with Ukraine and its recent threats revolve around Ukraine’s desire to join NATO, which Russia has vehemently objected to. 

Any potential invasion of Ukraine by Russia has oil markets on edge, as the country is a top oil producer and relies on Ukraine to export its oil to western countries. With oil inventories already low and demand for the commodity high due to consumers getting back to their pre-pandemic travel habits, any reduction in oil supply could lead to soaring energy prices and shake up the broader stock market.

“Should an invasion occur, we expect a significant bid for US Treasuries, putting demand for yield in direct conflict with the Fed’s intentions. Commodity prices may also accelerate, led by oil and gold,” Comerica Wealth Management’s chief investment officer John Lynch told Insider.

But Morgan Stanley’s Mike Wilson thinks the potential for soaring prices would eventually result in a blow to demand for the commodity, as rising inflation is already putting considerable pressure on consumers. 

“Energy stocks could be most at risk for a correction should a potential invasion happen in a way that leads to an oil and nat gas spike. Such a spike would destroy demand, in our view, and perhaps tip several economies into an outright recession – the polar vortex,” Wilson said. 

But an invasion by Russia is not certain, and diplomatic channels between the US, Russia, and other European countries remain open.

“We also continue our sincere efforts to reach a diplomatic solution, and we remain engaged with the Russian government following President Biden’s call with President Putin and my discussion with Foreign Minister Lavrov. The path for diplomacy remains available if Russia chooses to engage in good faith,” Blinken said.

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