Brent crude prices briefly touched $100 per barrel on news that Russia launched a military operation on Ukraine late Wednesday. This latest development also sent other commodities in the market rising.
Brent Crude Hits $100 Per Barrel Thursday
Brent crude prices went up to $100 per barrel Thursday morning before settling down to $99.50. This is the first time Brent crude hit the $100 milestone since 2014.
Meanwhile, West Texas Intermediate crude closed at 94.88 per barrel, which is a 3 gain from its previous close. On average, oil prices jumped by 3% when news of Russia’s military operation broke out.
Meanwhile, natural gas prices also jumped by 3.33%. Russia is the second-largest producer of crude oil and the largest supplier of natural gas in the world.
Crude oil and natural gas account for 26% and 12% of its total exports. Any disruptions in the Russian oil and gas industry can send prices surging in the global market. The current standoff with Ukraine is already weighing heavily on oil prices worldwide.
Gold Prices Also Up by 1.05%
The markets continue to scramble as uncertainty looms due to the escalation of the Russia-Ukraine crisis. Investors often favor gold, a traditional safe-haven asset, during times of crisis.
That’s because the precious metal does not carry any liability or counterparty risk. It also acts as an investment where you can mitigate losses in times of market stress.
Gold also serves as a hedge against inflation and currency rises. As of Thursday, gold traded at $1,927.67.
Now, market analysts are seeing gold breach the $2,000 mark. The theory that cryptocurrencies such as bitcoin will replace gold is fading fast.
As Russia continues its saber-rattling, investors are abandoning cryptocurrency and buying up gold instead. With gold looking to trade $1,970 if things escalate further in Ukraine, hitting $2,000 won’t be far behind.
Russia Is Major Oil Exporter
Frank Macchiarola, a policy expert from the American Petroleum Institute, said the US will feel the heat if things escalate further.
“Rising tensions in Eastern Europe have added additional uncertainty to an already tight market,” he said. Europe presently imports 40% of its natural gas and 25% of its oil imports requirements from Russia.
If countries decide to boycott Russia, they’ll need to find a new source. This will drive up the prices further. Joe Brusuelas, the chief economist at RSM, says that while Russia is not really important in the global economy, its oil resources are very much in demand.
In fact, Russia is “primarily a giant gas station”. The country also exports a number of metals and minerals such as palladium, silver, and nickel that America covets.
Unless the US Steps Up In Oil Production, Americans Will Suffer From Higher Gas Prices
Higher oil prices will mean higher gas prices for Americans as well. However, Macchiarola said that the crisis presents an opportunity for the US as an oil producer.
He said that America should send a message that it is open for energy investment. Consequently, that would mean that President Joe Biden will encourage production from the local oil players instead of muzzling them. The White House also needs to promote policies and incentivize production.
Given the impact of oil and metals, will boycotting Russia affect the US? The short answer is yes. “The average American household is going to bear some of the burdens of Putin’s invasion of Ukraine,” Brusuelas confirmed.
Watch the OANDA video asking the question that’s on every consumer’s mind: Will oil hit $100?
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