Oil extends eight-week rally on intensifying Ukraine tensions

Oil surged at the start of the week as escalating tensions over Ukraine fanned demand, with the US benchmark pushing toward $95 a barrel.

West Texas Intermediate jumped more than 1 per cent in early Asian trading, building on a run of eight straight weekly gains. A flurry of diplomacy over the weekend – including a telephone call between presidents Joe Biden and Vladimir Putin – failed to calm tensions after the US warned an invasion of Ukraine may be imminent. Moscow denies it plans to attack its smaller neighbour.

Crude surged to the highest since 2014 last week as the crisis reinforced a rally that’s been underpinned by soaring demand, supply interruptions, and declining stockpiles. Its run of weekly gains was the longest since October, before the emergence of the omicron virus variant. An invasion of Ukraine, coupled with retaliatory US-led sanctions, risks upending global energy flows.

U.S. National Security Advisor Jake Sullivan told CNN on Sunday that there’s “a distinct possibility” of major military action very soon. The same day, Biden spoke with Ukrainian President Volodymyr Zelenskiy, telling him that the US and others would act “swiftly and decisively” in the face of any aggression.

Gains in crude have fanned global inflationary pressures as leading economies extend their recovery from the pandemic. That’s squeezing consumers as gasoline costs roar higher, and complicating the task for central banks including the US Federal Reserve.

Oil traders are also tracking talks under way in Vienna to try to broker a revived nuclear deal that could allow more Iranian crude onto global markets, potentially cooling prices. Tehran has raised forecasts for revenue from oil exports by almost a third in its draft budget for the next Iranian year.