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At the start of the week Brent hit its highest since August 2014 on fears Russia will invade Ukraine. Confusion over de-escalation means the price action should remain volatile – Tuesday morning saw a pullback on headlines suggesting some troops being pulled back to base.

Headlines from Interfax flashed saying that a number of drills have finished and troops are expected to return to bases; some units of western and southern military districts have started returning to bases.  

The reports also said the Russian military is continuing with military drills alongside Belarus starting Feb 19th. The details emerged from defence ministry spokesman Igor Konashenkov, so appear legit, but it is unclear what it all means with regards Russia’s intentions. German Chancellor Olaf Scholz is in Moscow later today.

Oil and crude prices will be extremely sensitive to events on the Ukraine border and whatever next steps Russia decides to take.

The technical picture still shows crude is hugely overbought but the geopolitical premium continues to be a tailwind. 

Meanwhile the IEA said last week that Saudi Arabia and UAE could ease volatility in oil markets by pumping more. The problem is that OPEC members are generally finding it hard to meet the current quotas.  

Inventories are still at historic lows, market super tight but IEA says global supply-demand balance to more into a surplus as early as Q2.  

Right now, however, it’s the Ukraine and Russia headlines driving the price action – de-escalation this week would result in a big squeeze on all speculative longs. CFTC data shows these have been coming down for about 4 weeks as traders trim their positions the closer it gets to $100. 

 

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