Russia-Ukraine crisis: What happens next will impact oil prices, analysts say

The potential for a war in east Europe has made energy prices volatile over investor fears that conflict between Russia and Ukraine could disrupt supplies.

Oil prices are rapidly heading toward US$100 a barrel, but analysts say the chances of crude smashing that threshold greatly depends on what happens next in Ukraine.

The potential for a war in east Europe has made energy prices volatile over investor fears that conflict between Russia and Ukraine could disrupt supplies. Russia produces 10 per cent of global oil supply.

On Wednesday, the benchmark West Texas Intermediate price came close to US$94 per barrel in the morning’s trading, and many experts have suggested it will go higher.

“I think based on the momentum we’re seeing, unless we see a major pullback in Russian aggression, we likely will top $100 a barrel,” said Rory Johnson, managing director and market economist at Toronto-based Price Street Inc.

“But as of yet, this does seem to be purely geopolitical risk pricing, rather than any immediate fear of an actual loss of barrels.”

Investors have been closely watching developments in Ukraine, where Russia has amassed troops for a potential invasion.

The U.S. and other western nations have already responded with sanctions – driving investor concerns that Russia could respond by halting oil exports – and Germany withdrew a document needed for certification of the Nord Stream 2 gas pipeline from Russia.

Johnston said it’s highly unlikely the Ukraine crisis will result in a physical loss of barrels to the market, but if that were to happen, it would be “an extremely big deal.”