This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material 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 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. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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.