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Russia's Victory Day Could Be A Crucial Moment For Oil

While the Kremlin has publicly stated that it won’t be declaring war on Ukraine or announcing a military mobilization on Victory Day on May 9, the markets are jittery heading into the weekend, with speculation that Russian President Vladmir Putin will announce a doomsday scenario that indicates a war not just with Ukraine, but with NATO at large. 

Russian Victory Day celebrations are high-level affairs commemorating the Soviet Union’s victory over Nazi Germany in World War II. This year, the celebration is more important than ever for Putin, who is suffering mounting losses in Ukraine, where the objective has shifted to controlling the east and creating a land corridor to Crimea. 

When asked on May 4 whether the celebration would be used to declare war on Ukraine, Kremlin spokesperson Dmitry Peskov shrugged off the question as “nonsense”, RFE/RL reported

Western media headlines are awash with notions that Putin will deliver a doomsday message when he hits the podium on Red Square. 

The rhetoric has already been intensifying steadily, with Russian violations of Finnish and Swedish airspace as the two countries consider fast-tracking NATO membership, and with a simulated thermonuclear attack on Ireland aired on Russian public TV. 

Against this backdrop, oil markets were threatening to close higher today for the second week in a row, as the threat to global supplies emanating from the Russia-Ukraine war gains momentum against threats to demand from China’s COVID lockdowns. 

While oil has been highly volatile, fluctuating back and forth between weak Chinese economic data, which is bearish for oil, and tight global supply amid sanctions and more sanctions, which is bullish for oil–the bulls are winning this week. 

If Putin comes out with the high-level fear-mongering rhetoric that Western media is speculating for Victory Day, it could push oil further into bull territory on Monday. 

By Charles Kennedy for Oilprice.com

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Charles Kennedy

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Comments

  • Mamdouh Salameh - 7th May 2022 at 5:17am:
    So far the Ukraine conflict hasn’t caused any disruptions to global oil and gas supplies.

    However, disruption could happen in two ways. The first if the EU bans Russian oil imports and the second if Russia halts supplies of gas and oil because of the EU’s refusal to pay for them in rubles.

    The EU ban on Russian oil is looking increasingly dubious with the number of EU members opposing it on the increase and with Hungary threatening to veto it. The chances that Russia could halt supplies are increasing by the day particularly if the EU continues to refuse to pay in rubles. That could send gas and oil prices to stratosphere in no time and plunge the EU deeper into a very harsh recession.

    What President Putin may announce on Victory day is that Russian troops are now in control of the entire south eastern Ukraine and that a land corridor via the Ukraine port of Mariupol now connects the Crimea with both Russia and eastern Ukraine via a land corridor. He will also announce that Russia’s military objectives in Ukraine have now been completed. However, he will tell the West that Russian troops occupying other parts of Ukraine won’t withdraw until a peace treaty is signed with the Ukraine by which it will declare that it will never join NATO and recognize Russia’s sovereignty over the Crimea and also until all Western sanctions against Russia are lifted.

    Putin’s will issue a threat to NATO continues supplying advanced weapons to Ukraine that he won’t hesitate to act against them even if he has to use nuclear weapons.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
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