By Barani Krishnan
Investing.com -- Don’t ever count the oil bulls out — not with Vladimir Putin around.
Crude futures flew back to above $100 per barrel levels on Thursday after a Kremlin spokesman described reports claiming solid progress in Russia-Ukraine talks as "wrong" and Putin himself vowed not to succumb to Western pressure in ceding Moscow’s invasion of Ukraine.
U.S. crude’s West Texas Intermediate, or WTI, benchmark settled up $7.94, or 8.4%, at $102.98 a barrel. WTI lost a total of 13% in three prior days, settling at just above $95 on Wednesday.
London-traded Brent, the global benchmark for oil, settled up $8.62, or 8.8%, at $106.64 a barrel. Brent fell below $98 in the prior session, also losing 13% from the Monday-Wednesday slump.
“The West thinks we'll take a step back, but the west doesn't understand Russia,” Russia's president Putin said, as U.S. officials pointed to intelligence showing Moscow extending its air and artillery campaign across the south of the country as well as moving reinforcements from the Far East and Caucasus.
Ukrainian officials, meanwhile, repeated that they would not consider ceding territory to end the war, a key demand of Russia, which wants recognition for its annexation of Crimea in 2014 and for the breakaway republics it has sponsored in eastern Ukraine.
Ukrainian forces also carried out counter-offensives against Russian positions on Wednesday, seeking to inflict what one official called “maximum losses,” even as the invading Russian military stepped up its lethal attacks on cities.
The combined actions reversed the downdraft in crude prices that came amid the notion that diplomacy was working between the two sides, and more than previously.
Both WTI and Brent both settled below the $100 mark on Wednesday, the first time since Feb. 25. The three-day selloff was the largest market drop percentage-wise since the crude price collapse of April 2020, that occurred during the height of the demand destruction to oil from the Covid-19 outbreak.
Thursday’s rebound was especially acute as Putin spoke.
Adding to the upward pressure were remarks from the Paris-based International Energy Agency, or IEA, on Wednesday that some 3 million barrels a day of Russian production could be shut in from April, due to the difficulty of finding buyers.
Western oil majors such as Shell (LON:RDSa) have said they won't buy Russian crude any more, while many more buyers are trying to find alternative sources to avoid the risk of violating U.S. sanctions unintentionally. By contrast, Indian plans to circumvent Western measures by trading in non-dollar currencies are still at an embryonic stage.
Russia’s push back against reports of substantial progress in ceasefire talks felt like “a real setback just as things appeared to be heading in the right direction (and) had allowed oil prices to fall considerably from the highs,” said Craig Erlam, analyst at online trading platform OANDA.
The IEA’s assessment of a 3.0-million barrels per day loss in Russian exports was also “far more than the lost demand growth” expected from higher crude prices, noted Erlam.