Brent crude’s rally comes to a halt

Comments from Russian president Vladimir Putin have shown that reactionary measures to sanctions are an option.

Worries over energy supplies to Europe has been one of the markets major worries as the troubles in Ukraine have developed. The conclusion being, that sooner or later the sanctions imposed on Russian businesses and business men would trigger President Putin into action.

At the moment that action appears to be directed at Ukraine. As things stand, Ukraine owes Russian firm Gazprom $3.5 billion for gas that has already been supplied. The Russian firm has said that until bills are settled they will cease to export any more after 1 June. Ukraine has stated that should Gazprom reduce the price back to previous levels of $268 per 1,000cm, rather than the now inflated $485 per 1,000cm, then they will pay up. All of this increases Europe’s fears that similar issues could soon face them and that this could easily escalate.

Brent crude, along with oil and natural gas has benefited from this. After a week of heading higher crude has seen sellers coming in ahead of the weekend. However, unless steps can be taken to defuse this issue it is likely that fear will soon see the price, once again, driven higher. 

Brent crude chart

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.