WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange plummeted early Tuesday, sending U.S. and international crude benchmarks more than 3% lower after Russia announced a partial withdrawal of its military troops amassed along the Ukrainian border, sharply deescalating tensions in its standoff with the West that has rallied oil futures to their highest price points in 7-1/2 years.
Brent plunged towards $93 per barrel (bbl) after Russian Ministry of Defense, Sergei Shoigu, confirmed on Tuesday that some of the forces positioned along the Ukrainian border over the last four months were being pulled back to their bases. The move comes less than 72 hours after the United States government warned of an imminent Russian attack on eastern Ukraine, relocated its Ukrainian Embassy close to the Polish border, and called on its citizens to leave the country as soon as possible.
Moscow has consistently denied any plans to invade Ukraine and maintained that the troop buildup was part of military drills that were nearing completion in mid-February. The large buildup of Russian forces however, set off alarm bells in the West, with major news outlets calling for imminent Russian attack for months now that some suggest stoked panic and warmongering among the American public.
Fears of a Russian attack, the impact of sanctions on the global economy, and surging commodity prices hit markets hard on Monday, pulling both the Dow Jones Industrial Average and S&P 500 into negative territory for the session, lifting gold prices to the highest levels in eight months, and sparking an oil price rally that took U.S. crude past $95 for the first time since 2014.
In morning trade Tuesday, U.S. benchmark fell more than $3 to trade a tad above $92 bbl, and international crude benchmark Brent for April delivery traded near $93.40 bbl after topping $96 bbl on Monday. NYMEX March RBOB futures slumped more than 8 cents to $2.6966 gallon, and the front-month ULSD contract was down 9 cents at $2.8710 gallon.
Futures tied to DJIA indicate a 365-point opening bell gain while those linked to the S&P 500, which is down 7.65% for the year, are priced for a 62-point advance. U.S. dollar declined 0.29% against a basket of foreign currencies to trade near 96.080.
Russia remains one of the top 10 economies in the world and a leading commodity exporter, which includes palladium, coal, gas, aluminum, and crude oil. A military conflict could have sent commodity prices surging to fresh highs at a time when much of the world is already coping with sky-high inflation.
Consumer prices in the United States climbed to 7.5% last month from less than 1.5% a year ago, with prices for everyday consumer goods, including groceries, gasoline and rents up sharply. U.S. consumer sentiment index for February plunged to a decade-low of 61.7, according to a popular survey published by the University of Michigan. The recent decline in optimism was driven by weakening personal financial prospects, largely due to rising inflation, less confidence in the government's economic policies, and the least favorable long term economic outlook in a decade.
Liubov Georges can be reached at email@example.com