Russia is moving forward with annexing Crimea, and the Dow Jones Industrial Average (DJINDICES:^DJI)and oil are both moving higher in trading today. Investors are bidding up stocks because it appears that Crimea joining Russia won't result in military action from the European Union or the U.S., something that was uncertain just last week. But oil is up because the Crimea move has more to do with energy than anything else.
Energy is big business in Crimea
Crimea has already claimed ownership of Ukraine's Black Sea oil and gas, where 1.5 billion cubic meters of gas were extracted last year. That's one of the reasons Russia was interested in the region. Before unrest broke out this year, Ukraine (which Crimea exited in a disputed Sunday referendum) was close to reaching a deal with a consortium led by ExxonMobil (NYSE:XOM) that could have increased production to 5 billion cubic meters per year.
Russia annexing Crime might not be good for that potential deal. However, a calming of tensions would be good for ExxonMobil's joint venture with Rosneft in the Russian Arctic, its biggest investment outside the U.S. The company could have seen its multibillion-dollar investment put in jeopardy if violence between Russia and the West erupted.
However, Crimea is still in turmoil and Ukraine recently authorized its military to use force there. While the stock market may be overlooking risk of violence in the region, the commodity market isn't, and that's one big reason oil is up 1.5% to more than $99.50 today.
Chevron continues litigation
Elsewhere in Big Oil, ExxonMobil competitor Chevron (NYSE:CVX) received the go-ahead by a Gibraltar judge to pursue a lawsuit against online poker magnate Russell DeLeon, who helped fund a lawsuit against the company in Ecuador. U.S. courts recently found the Ecuadorian lawsuit and judgment of $9.5 billion to be full of holes including fraud and extortion.
More than likely, the case goes back to court where it's been for more than a decade and investors are left hanging. For today, it's a small win for Chevron in a legal battle that continues on.