Oil commentary - 21 March 2022

Morning all and I hope a great weekend was had by all. Brent is trading this morning at $111.51 up 3.58 and WTi is trading up 3.59 at $108.29. At times when I'm not sure to say I reach out for a clever quote from somebody famous, Winnie the Pooh perhaps, Lewis Carroll maybe, but I'm sitting here and I'm thinking, what quote could I use that would be apt in current times? The answer is, I can't. This time last year we were looking at the world slowly coming out of a pandemic, or at least being on the path to that, we were moaning about big boats stuck in the Suez Canal and what effect that would have on somebody's flat pack furniture. Some of us were watching Mexit very closely and what questions Oprah might pose to the Sussexxxsessesessss.?I was looking at the top four of the English Premier League wistfully, asking myself "what would Tony Adams do?". Then I look at where the world is today and those stories I mention are nothing short of material. Crude in the triple digits would have been laughed out of the room this time last year (we were trading at $64.62 FWIW) but looking at the state of the supply/demand balance in the oil market right now I am sorry to say that $111.51 for a barrel of crude oil looks pretty cheap. As I have been saying for a while now, I don't think oil over $100 per barrel is anything to celebrate, in fact I think it drags up the dreaded "R" word out of the economic diary quicker than anybody could have had it pencilled in, if I'm honest. But with all commodity prices surging what with the potential global embargo on imports from Russia one cannot argue that the price of just about everything, from a bottle of shampoo to a loaf of bread, is going to increase, and increase big time. I mention the news items above not out of anything apart from the fact that when we look back and we tried to apply reasons for why a barrel of oil might be going higher, or lower (maybe not Mexit, actually), but today we are faced with not just an energy, but a commodity crisis. "European Union governments will consider whether to impose an oil embargo on Russia over its invasion of Ukraine as they gather this week with U.S. President Joe Biden for a series of summits designed to harden the West's response to Moscow". That sentence pretty much sums up everything right now, and this is being reflected in oil trading this morning. What do I think the week has in store for oil markets? Honestly I couldn't tell you what the next hour has in store right now, but oil prices dipped last week, I don't think this was anything more than profit taking because from a physical fundamental point of view the potential of supply deficits is becoming ever more a reality. Good day, and week to all.