With violence across the eastern region of Ukraine, Russia mobilized troops to the Crimea peninsula. Despite the fact that Russian President Vladimir Putin said he would use force as a “last resort,” the move has impacted many markets, including oil.
People who partake in crude oil trading should pay close attention to the situation in Ukraine, as prices are on the rise out of fears over disruption, according to the Wall Street Journal. The physical oil supply hasn’t been impacted yet, but both Nymex and Brent crude prices increased in response to Russia’s movement to Crimea.
With Russia being one of the world’s largest oil and gas producers, tensions in Ukraine escalating could have serious implications for the world’s oil market.
“For now oil prices have gained slightly but after London markets open it is possible that oil prices go up further,” Ken Hasegawa, commodities sales manager in Japan, told the news source. “The price of West Texas Intermediate oil may touch $105 in the short term.”
With Putin announcing Russia would take every action necessary to avoid the use of military force in Ukraine, worries eased, which led to a drop in oil prices in the second week of Russia’s movement in Crimea.
Following Putin’s comments, crude oil decreased nearly 2 percent, from the five-month high previously reached, as Russian troops engaged in military exercises near the Ukraine border were ordered back to the base, according to Reuters.
“The receding fears of a disruption of the Russian crude oil supply and the easing geopolitical concerns are weighing on crude,” Dwayne Pliska, senior trading consultant for HighGround trading in Chicago, Ill., told the news source.
The best possible scenario in Ukraine would be a peaceful resolution. Not only would it prevent military action, but the economy could benefit as well. If Russia is subjected to economic sanctions by the U.S. and other nations, the oil supply could be disrupted, which may put a tremendous amount of pressure of crude oil prices.
Investors should keep a close eye on the situation, because if Putin reneges on his words and continues with the military presence in Crimea, there could be some consequences for oil markets across the world.
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