Oil rallied after Russian President Vladimir Putin ordered a partial mobilization to hold onto occupied territories in Ukraine, an escalation that could lead to further disruption to energy supplies.
West Texas Intermediate surged toward $87 a barrel, adding as much as 3.2 per cent. Russia will take necessary steps to defend its sovereignty and will defend territory with all available means, Putin said as he announced a partial mobilization of the country’s population.
The move threatened to escalate the conflict further after the Kremlin has moved to stage sham votes on annexing the regions of Ukraine it still controls.
The growing tension comes ahead of a decision by the Federal Reserve on monetary policy later on Wednesday. The central bank is expected to raise interest rates by 75 basis points and put numbers on the “pain” it’s been warning of when it publishes new economic projections.
“Supply disruption concerns are supporting oil,” said Giovanni Staunovo a commodity analyst at UBS Group AG.
Crude is on track for its first quarterly loss in more than two years as concerns over a global economic slowdown weigh on the outlook for energy demand. The Fed decision will be followed by other central banks from Europe to Asia, which are also expected to increase borrowing costs.
- WTI for November delivery surged 3.1 per cent to $86.53 a barrel at 8:55 a.m. in London.
- Brent for November settlement gained three per cent to $93.33 a barrel.
Putin’s comments sparked a bid for US treasuries and haven assets including gold. He also hinted at the use of nuclear weapons in the conflict, while Defense Minister Sergei Shoigu told state TV that 300,000 reservists would be called up under Putin’s order.
Elsewhere, the industry-funded American Petroleum Institute reported US crude stockpiles rose more than 1 million barrels last week, according to people familiar with the figures. Inventories at the key storage hub at Cushing, Okla., and nationwide gasoline supplies both expanded.
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