The oil complex settled sharply higher Monday as a Russian military intervention in the Ukraine heightened concerns over global oil supplies from Russia -- one of the top oil producers in the world.
NYMEX April crude settled $2.33 higher at $104.92/barrel. The contract reached a five-month high of $105.22/b during the session. ICE April Brent settled $2.13 higher at $111.20/b after hitting a two-month high of $112.39/b.
The price action took the front-month Brent-WTI spread close to the $6/b level, but it failed to break below that and settled at $6.28/b, down from $6.48/b on Friday.
In products, NYMEX April ULSD settled 6.42 cents higher at $3.0805/gal and April RBOB ended 4.29 cents higher at $3.0203/gal.
"Russia is one of the world's largest oil producers and exporters," said Mike Fitzpatrick of the Kilduff Report. "It also exports a lot of refined products so the surge higher in oil prices makes sense on that basis."
He added that crude oil prices surged in reaction to the crisis in the Ukraine, but equities were lower on the potential damage to the global economy.
"Russia has been a bigger and bigger global trading partner, so its isolation would hurt global GDP," Fitzpatrick said.
Over the last day, 10 Russian combat helicopters and eight military cargo planes have landed on the Black Sea peninsula of Crimea, according to an AFP report quoting Ukraine border guards, while four Russian warships have been in the port of Sevastopol since Saturday.
Tim Evans, commodity analyst at Citi Futures Perspective, said given that Russia produces more than 10 million b/d of oil and exports more than 4.5 million b/d, "even a partial disruption could be material to the global market."
Evans added that Saudi Arabia has about 3 million b/d in spare capacity, "but tapping that would take some time, and would leave the market without the ability to respond to any further shortfalls."
Ukraine's military said Monday that Russia had given its forces an ultimatum to surrender in Crimea or face an all-out assault on the strategic Black Sea peninsula that has been overrun by Kremlin-backed troops, according to an AFP report.
Addison Armstrong, analyst at Tradition Energy, said the situation in the Ukraine has raised concerns about oil supplies from Russia, "but on the other hand, economic data out of the US, China and Europe were all disappointing and point to the potential for slowing demand for oil."
Recently, the US saw a sharp downward revision to fourth quarter GDP growth estimates and lower home sales data on Friday, while lower manufacturing PMI data was seen in China and Europe.
