Both Brent and WTI crude are up by roughly 5% on the day with the former hitting above $110 and the latter above $108 as we look towards European morning trade.
The Russia-Ukraine war is part of the reason for the surge but the multitude of factors contributing to the more bullish backdrop should not be ignored either. I've mentioned the trifecta time and time again. That being low inventories across the globe, supply struggling to catch up to recovering demand as the pandemic fades, and a steep backwardation in the curve.
So, if you add geopolitical tensions on top of that, that is definitely some spicy stuff. I'm not going to argue about how stretched the technicals may look because sentiment is looking to override everything at the moment.
For now, the market is caught up by emotion trading and the Russia-Ukraine situation exemplifies that.
We've moved past talk of $100 oil already and the next big figure will be looking towards $120 to $125. We may not get there in one straight line but amid the long-term backdrop of underinvestment, it sets up a good platform for oil to remain bullish as the green transition plays out in the next decade.
