Brent crude price drops

As tensions in Ukraine ease, Brent crude has given back yesterday’s gains.

The last 24 hours have seen a range of $3.27 in the Brent crude price, as fears that military action between Ukraine and Russia would escalate have so far come to nothing. Yesterday afternoon saw Russian troops conducting military exercises next to the Ukrainian border, but overnight these exercises have come to an end and Russian troops have subsequently been returned to their garrisons. Although the troops stationed in Crimea are unlikely to move out, it does appear that the chances of this situation escalating have diminished.

Trying to predict the direction of Brent crude in the short term will become particularly difficult as the biggest driving force is likely to be the political rhetoric emanating from Russia, Ukraine and the west. The obvious, non-military, action that Russia could take in retaliation to any sanctions the west might impose would be to turn off the gas and oil taps that run through Ukraine. Considering that this would cut roughly 30% off German consumption, the crippling effect to the fragile EU recovery could be long-lasting. Fully aware of this, it is likely that the EU will tread a little more lightly than they might have otherwise.

Brent crude chart

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