$70 worth of WTI crude oil seen if tensions between Russia and Ukraine ease

  • US oil prices could fall to $70 a barrel if the political crisis between Russia and Ukraine eases, asset manager DWS said.
  • Russia has deployed over 100,000 troops to the Ukrainian border.
  • WTI oil traded above $89 a barrel on Tuesday and this year has reached highs not seen since 2014.
  • Sign up here for our daily newsletter, 10 things before the opening bell.

U.S. oil prices could fall more than 20% from current levels if investors see tensions between Russia and Ukraine ease, German asset manager DWS said.

This year, West Texas Intermediate crude has jumped nearly 19%, recently topping highs not seen since 2014, as global oil investors eye Russia’s deployment of 130,000 troops to Ukraine’s border. The Kremlin, under the leadership of President Vladimir Putin, demands, among other things, that NATO not accept the membership of Ukraine and other former Soviet nations.

The crisis has helped push WTI oil to a high this year above $93 a barrel, a level not seen since August 2014. On Tuesday, WTI was up 2.15% at $89.36 per barrel. barrel ahead of increased oil exports from Iran as the United States resumes indirect nuclear talks with the Middle Eastern nation and OPEC member.

“With WTI close to $90 now, we believe it is nearly $20 overvalued, which rightly offsets current geopolitical risks,” wrote David Bianco, chief investment officer for the Americas at DWS Group, in a note on Monday.

“But if the Russian-Ukrainian conflict subsides or with a new status quo, we believe WTI oil prices will return to near $70,” he said. A drop to $70 would represent a 22% decline.

DWS said it likes to watch crude oil adjusted for inflation and the US dollar. And on that basis, the average WTI oil price since 1973 is $67 a barrel.

Oil prices this year have also risen due to stronger global demand for the commodity, in part because the Omicron variant of the coronavirus has not led to mass work stoppages and other social activities in the world.

Brent crude, the international benchmark, recently rose above $92 a barrel and hit around $91 a barrel on Tuesday.

Richard L. Militello