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Crude oil aim for $140 as US and UK ban Russian oil

The price of crude oil has surged 30% since the war started and 94.72% from the same time last year. The supply-side shock has spread across all the major commodities that Russia exports, including oil, gas, grain, and metals.

Source: Bloomberg

The market chaos caused by the war in Ukraine hit a new level as the U.S. officially announced plans ban imports of Russian fossil fuels, including oil. A move that is a bombshell to attack Russia’s economy and comes with a cost to the US’s economy.
The UK joined the US with the sanctions though it will continue to allow natural gas and coal from the country. Other European nations that rely heavily on Russian fuels decided not to participate.

The price of crude oil has surged by 30% since the war started and 94.72% from this time last year. The supply-side shock has been spreading across all the major commodities that Russia exports, including oil, gas, grain, and metals.

Russia’s percentage share of key global commodity production in 2021

Russia’s percentage share of key global commodity production in 2021 Source: IG

Key commodity price change after Russia’s invasion

Commodity chart Source: Trading Economic

Brent crude

Given that there is no sign that the underlying oil supply crisis could be eased in the near term, it’s not hard to foresee that the price will keep pushing higher. This week alone, the cost of both Brent crude and WTI have reached their highest level since 2008. The next target for crude oil in view would be the all-time-high level at $140, last seen in June 2008.

Brent Crude Source: Trading Economics

From a technical point of view, the gap created earlier this week has offered massive support which was demonstrated over the last three trading days. The peak of $146 from 2008 now looks like to be the next destination, just in a matter of time.

Brent Crude chart Source: IG

WTI

The recent high at $128 looks like to be the imminent resistance for the WTI, and the level of $114 will be the current support level. However, as the market is now trading at the headlines, the outlook will highly depends on how things change in regards to the supply crisis deteriorated by the war.

WTI chart Source: IG

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This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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