Benchmark crude prices today extended a powerful rally that got under way last night, during which oil prices breached a number of resistance levels and advanced about 2%, retracing to 2014 highs. By the time of writing, Brent was up 3.52% at $98.75/bbl, while WTI was 4.85% higher at $95.49/bbl.
The key factor driving the rally was recognition by Russian President Vladimir Putin of the independence of the two self-proclaimed DPR and LPR Donbass republics, which came into existence back in 2014. Since recognition of independence does not exclude, and in this case includes, Russian military assistance to these republics, the oil market is expecting possible sanctions against the Russian energy sector, which could reduce the supply of oil and push prices higher. Last week, the Energy Ministry of Saudi Arabia, which is Russia's partner in the OPEC+ agreement, spoke very cautiously about the possible actions of OPEC+ in the event of a market shortage. But even if sanctions against the Russian energy sector do not include restrictions (or at least significant restrictions) on the country’s oil exports, the overall market trend is an upward trajectory as oil shortages have already materialized as reality due to limited supply from OPEC+ and rapidly rising global oil demand.
The Brent price yesterday easily broke out of the key $95/bbl resistance level, so at this point the short-term upside target is $100/bbl.