20220227 kyiv oil depot
The Russia-Ukraine conflict is stoking concerns about tightened oil supplies. That's the factor in play as oil pushes into the $110 plus a barrel territory. Image Credit: Reuters

Dubai: Spot oil prices have pushed past $110 a barrel with US President Joe Biden’s State of the Union Speech failing to cool off concerns over the Russia-Ukraine situation. Even the announcement on Tuesday that the US and its key allies would release oil from their reserves has so far failed to dent oil’s determined surge up the charts.

“Oil prices are surging once more as the conflict in Ukraine intensifies, the West continues to impose severe sanctions and companies turn their backs on what is becoming an increasingly isolated Russia,” said Craig Erlam, Senior Market Analyst for the UK and EMEA territory at Oanda, a consultancy. “We're starting to see what impact these sanctions could have on Russian oil exports and the challenges they pose and that's driving the price higher.”

President Joe Biden delivers his first State of the Union address
President Joe Biden delivers his first State of the Union address to a joint session of Congress at the Capitol, Tuesday, March 1, 2022, in Washington as Vice President Kamala Harris and House speaker Nancy Pelosi of California., look on. Image Credit: AP

Clearly, the US move to release 60-70 million barrels from their reserves is not turning out to be reassuring for the oil markets. Any further tightness in the free flow of oil into global markets – including Russian oil – will add to the tightness, analysts say. And that’s when inflation will kick into higher gear.

Despite the US once again leading discussions around a coordinated release of oil reserves of around 60-70 million barrels, which is clearly doing little to calm the nerves. We saw an underwhelmed reaction when this happened in November as well and that was before Russia invaded Ukraine

- Craig Erlam, Senior Market Analyst at Oanda

Taking on inflation

President Biden did devote quite a bit of time on inflation and its accompanying pressures, while most of the speech dwelled on Russia.

“We have a choice. One way to fight inflation is to drive down wages and make Americans poorer. I think I have a better idea to fight inflation: Lower your costs, not your wages. Make more cars and semiconductors in America. More infrastructure and innovation in America.

"More jobs where you can earn a good living in America instead of relying on foreign supply chains. My plan to fight inflation will lower your costs and lower the deficit."

Asian stock markets

Investors in Asia, however, don’t seem to be that enthused by the Biden comments, with all of the key indices trailing lower. This reverses the trends from the last two days where most Asian markets, except for Hong Kong, was in the green. (Hong Kong’s sentiments had more to do with trying to combat the COVID-19 crisis.)

India’s Sensex is down 700 points, as investors fret about oil prices and the high cost that India will have to shell out to meet its import bills.