Crude oil jumps on US-Russia oil ban, Asian stocks wobble

FILE PHOTO: A man looks at stock monitors in Taiwan
FILE PHOTO: A man looks at stock market monitors in Taipei January 22, 2008. REUTERS/Nicky Loh

March 9, 2022

By Andrew Galbraith

SHANGHAI (Reuters) – Crude oil prices surged again on Wednesday, while Asian stocks struggled as investors assessed the impact of the deepening conflict in Ukraine and a new US ban on Russian oil.

The price of a barrel of crude oil, which was already surging in January on supply concerns and expectations of a strengthening global economic recovery, has skyrocketed since Russia began invading Ukraine on February 24. The price of oil is now about twice as high as it was low in early December.

Risking even higher US fuel prices that could slow economic growth, President Joe Biden on Tuesday imposed an immediate ban on Russian oil and other energy imports in retaliation for the invasion, amid strong support from American voters and lawmakers.

The ban limits sweeping US and European sanctions imposed on Moscow for starting the biggest war in Europe since World War II. Russian attacks have targeted Ukrainian cities, killing hundreds of civilians.

Britain also announced that it would stop importing Russian oil and oil products by the end of 2022.

“The oil shock is inherently accumulating, not a one-off, and the potential for the market to hit $150 before bouncing back to $100 is easier for investors to digest,” said Stephen Innes, Managing Partner at SPI Asset Management.

“Enacting sanctions without first developing backup supply situations risks Brent crude going much higher.”

Global benchmark Brent was last traded at $131.39 a barrel, up 2.66% on the day but still below the high of $139.13 set on Monday.

US West Texas Intermediate crude rose 2.19% to $126.41 a barrel.

Russia is calling its actions in Ukraine a “special operation” and earlier this week warned that if the West blocked its oil exports, prices could soar to $300 a barrel and shut down the main gas pipeline to Germany.

In equity markets, MSCI’s broadest index of Asia-Pacific stocks outside Japan fell 0.26% as a trend reversal in Chinese stocks erased earlier gains.

China’s blue-chip CSI300 index fell 1.27% after inflation data reflected a combination of weak domestic demand and high commodity prices, and the country continued to report rising numbers of coronavirus cases.

In Hong Kong, where infections have risen to record highs, the Hang Seng fell more than 2%.

But broader regional losses were held in check by gains elsewhere, with Australia’s commodity-heavy ASX 200 up 0.85%. In Tokyo, the Nikkei rose 0.3%.

“I think we’re getting tired of Russia. We’ve had 10-12 days of bombing of Russia in the headlines now. At the same time, while it’s tragic what’s happening over there, I think we’ve priced in the worst of the worst,” said Matt Simpson, senior market analyst at City Index.

Wobbly stock price action in Asia followed another red day on Wall Street, where the Dow Jones Industrial Average fell 0.56%, the S&P 500 fell 0.72% and the Nasdaq Composite fell 0.28%.

“Markets remain volatile and are unable to safely price in the impact of news flow given the complex nature of the global economy,” said Rodrigo Catril, senior FX strategist at National Australia Bank.

The yen hinted at a retreat from safe-haven assets, weakening 0.16 to 115.84, while the dollar weakened against a basket of peers to 99.056.

The euro was up 0.07% at $1.0907 and the ruble was last traded at 122.5 against the greenback.

US Treasury yields edged down, with benchmark 10-year bonds last returning 1.8507%, compared to 1.871% late Tuesday. The 2-year note last returned 1.6008% after 1.629%.

Gold prices firmed 0.14% to $2,055.31 an ounce after slipping earlier on a stronger dollar.

(Reporting by Andrew Galbraith; Editing by Sam Holmes and Kim Coghill) Crude oil jumps on US-Russia oil ban, Asian stocks wobble

Caroline Bleakley

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