Following the intensification of the Russia-Ukraine crisis, Oil prices soared to within striking distance of $100 a barrel early Tuesday, when Brent hit $99.50 before falling to $97. Analysts estimate that the already priced-in geopolitical risk premium is more than $10 a barrel, and that it’s only a matter of time before crosses the triple-digit threshold.
Even if a worst-case scenario of a conflict with subsequent Western sanctions on Russian energy exports does not materialise, the Ukraine premium is a large part of the current rally towards $100 Oil. There are several bullish fundamentals that could keep prices elevated even if the worst-case scenario of a conflict with subsequent Western sanctions on Russian energy exports does not materialise.
According to a tweet from Russia’s envoy Mikhail Ulyanov on Tuesday, rumours have intensified that the indirect discussions between the US and Iran about returning to the 2015 deal are in their last stages and are “ready to pass the finish line.” “Intensive consultations in multiple formats are ongoing at the final stage of the #ViennaTalks,” Ulyanov said a few hours later. Iran could add 1.3 million barrels per day (bpd) to the world Oil supply, but it would require time to restore payment settlements and Iranian foreign accounts, including technical time. In any case, increased supply would relieve the tight Oil market if a deal is made.