Crude Oil Prices Sink Even as War in Ukraine Rages, ECB and US CPI Ahead


  • Crude oil prices sink alongside haven assets, stocks and the Euro rally
  • Price action hints at easing Ukraine fears even as the fighting rages on
  • ECB rate decision, US CPI data eyed as tests of central banks’ mettle

Crude oil prices plunged, losing nearly 13 percent to record its worst one-day performance in over three months. The move appeared against an emphatic backdrop: gold prices sank alongside the anti-risk US Dollar and Japanese Yen while stock indices and the Euro shot upward.

Meanwhile, the price spread between the European-based Brent crude oil benchmark and its US-based WTI counterpart narrowed, suggesting that regional risk premiums eased somewhat. Still further, the spread between front- and second-month crude oil futures narrowed, implying that rabid demand cooled a bit.

Such fireworks scream of an uplifting breakthrough in Ukraine, yet the situation on the ground seems relatively little-changed: Russia continues to broaden its invasion, seemingly in a bid to amass as much leverage as possible before biting Western sanctions force the start of ceasefire talks.

Market chatter attributes the sudden cheer to comments from the Deputy Chief of Staff to Ukrainian President Zelensky. He told Bloomberg that Kyiv is “ready for a diplomatic solution”, adding it is prepared to discuss accepting neutrality if security guarantees are given. Giving up a “single inch” of territory was ruled out.

The episode seems telling. Perhaps it implies that exposure on the risk-off side of the spectrum was uncomfortably extended, with traders itching to abandon bets linked to ongoing conflict. The amplitude of reversal across markets in the event of a truly substantive push toward de-escalation may be more dramaticstill.


A skeptical mood in early European trade underscores the absence of such progress, however. Regional bourses are in the red alongside US stock index futures, suggesting a dour disposition. Besides the steady stream of Ukraine-related headlines, an ECB rate decision and US CPI data are in view.

ECB President Christine Lagarde and company seem unlikely to take meaningful policy action or to commit to specific forward guidance as the fog of war obscures the economic outlook. Meanwhile, core US inflation excluding food and energy is expected to have hit 6.4 percent on-year last month, a 40-year high.

Both outcomes are likely to be seen as tests of central bank officials’ fortitude in the fight against runaway price growth. The tone at the ECB as telegraphed by Ms Lagarde may be echoed in sentiment trends, with oil and the Euro continuing to trade inversely. A CPI print beckoning a hawkish Fed may broadly spoil the mood.


The WTI contract is testing the lower bound of a dense block of resistance-turned-support at 107.68. Breaking below that may bring a test back below the $100/bbl figure. Alternatively, securing a foothold back above 114.83 may set the stage for a push toward the latest swing high at 130.50.

Crude oil price chart created using TradingView


— Written by Ilya Spivak, Head Strategist, APAC for DailyFX

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter

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