Oil prices rise more than 2% as Putin mobilizes more troops

Pumpjacks are seen during sunset at the Daqing oil field in China’s Heilongjiang province, 22 August 2019. REUTERS/Stringer

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SINGAPORE, Sept. 21 (Reuters) – Oil rose more than 2% on Wednesday after Russian President Vladimir Putin announced a partial military mobilization, escalating the war in Ukraine and raising concerns about tighter oil and gas supplies.

Brent crude futures were up $2.28, or 2.5%, to $92.90 a barrel at 0707 GMT after falling from $1.38 the previous day.

US West Texas Intermediate crude was $86.16 a barrel, up $2.22 or 2.6%.

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Putin said he signed a decree on partial mobilization on Wednesday, saying he was defending Russian territories and that the West wanted to destroy the country. read more

The escalation will lead to more uncertainty about Russia’s energy supply, said Warren Patterson, head of raw materials research at ING.

“The move could potentially lead to calls for more aggressive action against Russia in terms of sanctions from the west,” he said.

Oil prices skyrocketed, reaching a multi-year high in March after war broke out in Ukraine.

European Union sanctions banning Russian crude oil imports by sea will come into effect on December 5.

“It seems like a knee-jerk reaction to a piece of news and could be further calibrated in the coming hours,” said Vandana Hari, founder of Vanda Insights in Singapore.

Meanwhile, the United States said it did not expect a breakthrough at the UN General Assembly this week in reviving the 2015 Iran nuclear deal, which would diminish the prospects of a return of Iranian barrels to the international market. read more

The OPEC+ producer group – the Organization of the Petroleum Exporting Countries and Related Countries, including Russia – is now falling a record 3.58 million barrels per day below its production targets, or about 3.5% of global demand. The deficit highlights the underlying supply shortage in the market. read more

Investors this week braced themselves for another aggressive rate hike from the US Federal Reserve, which they fear could lead to a recession and falling fuel demand.

The Fed is widely expected to raise interest rates by 75 basis points for the third time in a row later on Wednesday in its efforts to contain inflation.

Meanwhile, U.S. crude oil and fuel inventories rose about 1 million barrels for the week ended Sept. 16, according to market sources citing figures from the American Petroleum Institute on Tuesday.

US crude inventories are estimated to have risen by about 2.2 million barrels in the week to September 16, according to a comprehensive Reuters poll.

The head of Saudi state oil giant Aramco (2222.SE) warned on Tuesday that the world’s reserve capacity for oil production could quickly be used up if the global economy recovers. read more

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Reporting by Yuka Obayashi, Isabel Kua and Florence Tan; Editing by Kenneth Maxwell, Ana Nicolaci da Costa and Kim Coghill

Our Standards: The Thomson Reuters Trust Principles.

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