Russia provides a large portion of Europe's oil supply. So Ukrainian insistence that Russian humanitarian convoy being sent the eastern side of the embattled country in order to arm separatists created uneasy future expectations. And artillery fire on the convoy didn't help tensions, either.
On an interesting note, the Wall Street Journal noted prices were still at a loss since global demand forced them down into lows for the past several months, even as the Ukrainian region has faced instability for months. WSJ also observes that fear of backlash due to severe sanctions on Russia has created a tightrope of prices.
"Russia is the world's No. 2 oil-exporting nation" and the country supplies to Europe, as well as Asia. If European access became limited, already high gas prices would increase and effect larger countries such as Germany and France. However, the sanctions have not limited oil output—perhaps in part because oil provides a lot of financial benefits for the Russian tycoons.
According to the journal, the September price of light, sweet oil on the New York Mercantile Exchange Brent is $97.35 per barrel with a U.S benchmark loss of .3% and a Brent-specific loss of 2%. Meanwhile, ICE Futures Europe saw the price climb to $103.53 a barrel.
The unrest has created a fear among traders, too.
Bill Baruch said, "Anybody who sold crude is wondering how bad it can get." As a senior market strategist at brokerage iiTrader in Chicago, Baruch understands the fear in the market and noted that traders who bet on lower prices closed wagers in an attempt to not lose money.
"Now we're headed into the weekend, there's definitely a fear of selling."
Confluence Investment Management's Bill O'Gracy, the company's chief market strategist, told Bloomberg the falling prices on a primed rebound doesn't offer a lot. "When there’s the prospect of ground war in Europe you don’t want to be short oil."
Should there be a fear? Wall Street notes that "September options contract for U.S. oil expired on Friday" and led to a backwardation, which is when a "front-month contract is more expensive than later contracts." That doesn’t sound particularly good.
Business (@BBCBusiness) August 13, 2014
September's front-month U.S. oil contract ended up at $2.03 a barrel above October's contract. Bloomberg marks the price at $102.01, and the lost front-month contract since June 26, 2013. Prior to July, the last time for such a steep backwardated happened was in 2008.
In the area most Americans are concerned, September's "reformulated gasoline blendstock, or RBOB, settled up 3.2 cents, or 1.2%, at $2.6986 a gallon." The prices fell 2% this week, and hopefully gas prices will hold as summer vacation closes out. And diesel rose 2.85 cents, or 1%, to even out at $2.8480 per gallon. Overall, the prices fell 1%. Nationwide, the price per gallon was $3.468, the lowest since March.
Even with the European unrest, the falling prices are centered around Iraqi Prime Minister Nouri al-Maliki's resignation of office and possibility of a less "less divisive government" amidst the Kurdish attempt to retake the country from the Islamic State (ISIS) in the north. Since Iraq was the second-largest producer in the Organization of Petroleum Exporting Countries (OPEC), stability is vital to keep gas prices reasonable as Europe wavers.