Oil prices are rising on global markets: what are the reasons and how will this affect Ukraine?
13 January 12:12
ANALYSIS FROM 
Oil prices rose on Tuesday, January 13, as heightened tensions surrounding Iran and potential supply disruptions outweighed the prospect of increased supply from Venezuela.
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Oil prices are rising
By 08:17 Kyiv time, Brent crude futures had risen 0.55% to $64.22 per barrel, while WTI crude futures had risen 0.59% to $59.85 per barrel.
“The price increase is happening against the backdrop of protests in Iran, increasing the likelihood of some form of intervention by the US,” ING analysts said on Tuesday.
Iran, one of OPEC’s largest producers, has faced the most widespread anti-government protests in recent years. US President Donald Trump is threatening to respond with military action to the harsh crackdown on demonstrations.
Trump plans to meet with senior advisers on Tuesday to discuss options for action on Iran, a US official told the media.
On Monday, January 12, the US president said that any country that does business with Iran will face 25% tariffs on trade with the United States. Markets are also concerned about a possible increase in oil supply due to the expected resumption of exports from Venezuela. After the overthrow of President Nicolas Maduro, Trump said last week that the Caracas government was ready to transfer up to 50 million barrels of oil, which is subject to Western sanctions, to the US.
Oil market instability
The global oil market is currently in a state of heightened turbulence, and the key reason for this is political instability in countries with large reserves of “black gold.” As economist Andriy Novak notes in an exclusive commentary
“Today, oil price fluctuations on the world market are explained by the fact that in countries with large production and large reserves, such as Venezuela and Iran, there are now, as we know, such active political events with unpredictable consequences. And therefore, there is a corresponding reaction on the oil market,” he said.
According to the expert, market participants do not understand “what kind of government will be in place in both oil-producing countries,” and therefore volatility has become a logical response to the risks. Political factors are increasingly playing a decisive role in price formation, even exceeding the influence of purely economic indicators of supply and demand.
“Players do not understand what kind of government will be in place in both major oil-producing countries, Venezuela and Iran. And therefore, such market volatility is now, in principle, easily explained by these political events in two major oil-producing countries,” the economist notes.
How oil fluctuations will affect Ukraine
At the same time, Novak believes that Ukraine should not expect any direct negative effects from these events. The reason lies in the structure of the Ukrainian fuel market.
“We import 100% of our fuel,” and the country depends primarily on prices in Poland, Romania, and Lithuania. If these countries do not change their pricing policy for the Ukrainian market, then domestic fuel prices will remain stable, regardless of the situation in Iran or Venezuela, the expert noted.
The economist also drew attention to Russia’s situation. In his opinion, global oil prices “currently have no direct correlation” with Russia’s ability to earn money from exports. Due to sanctions, legal restrictions, and tanker seizures, particularly by the US, Russian oil is facing increasing barriers. Therefore, even with high global prices, Russia cannot take full advantage of the situation, and the global market is becoming less and less dependent on its export potential.
“For Russia, in principle, there is currently no direct correlation or direct dependence between global oil prices and its ability to sell oil and earn money from it. This is because, first of all, almost every day, various forms of sanctions, both international and legal, as well as direct, physical sanctions are imposed by the Armed Forces of Ukraine and, more recently, by the US administration, which is arresting Russian tankers or tankers carrying Russian oil one after another. Therefore, for Russia, the global market is currently not correlated with its ability to sell oil and petroleum products,” Andriy Novak concluded.
