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Putin brings geopolitical risk back into oil

Vladimir Putin
Maxim Shipenkov | Pool | Reuters
Vladimir Putin

Russia's military buildup and bombing campaign in Syria this week rekindled the security premium in oil prices.

Crude futures are the place for many traders to hedge their portfolios against geopolitical risk, especially when it concerns the Middle East.

While the supply and demand fundamentals of oil remain overwhelmingly bearish or negative for prices, Russia's involvement caused prices to surge higher the past two weeks.

Last week, the mere news of the Russian military buildup caused the oil market to rally and hold onto some of those gains even in the face of bearish inventory data from the Department of Energy in its weekly report.

Prices rallied again earlier this week, on news of the initial bombing sorties carried out by the Russian air force.