Oil commentary - 24 February 2022
Morning.?Brent is trading this morning at $103.64 up 6.80 and WTi is trading up 6.15 at $98.25. Right, where do I start. Well, if I'm honest my day started at 0630 with the usual morning brew, four hours later and it's still waiting to be consumed.?Now, unless you haven't read the headlines this morning or don't have access to the internet (then how would you be reading this?) then all news outlets are leading with this - "Russian President Vladimir Putin announces a "military operation" in Ukraine's Donbas region".?There are myriad other headlines, as I'm sure you can guess, none of which are good. Oil markets have reacted to this, again as I'm sure you can guess, by roofing. I'll be honest, I cannot believe I am sitting here writing this after two years of being in a pandemic with the next biggest story being one of that Europe is on the verge of war. I'm going to keep opinions to myself, but as I have been saying, $100 oil is nothing to celebrate. It only highlights the torrid state oil markets are in. Like I said on Monday, $100 oil could very well look cheap in only a few days time. The big question all markets face themselves with right now, especially energy markets, are what is the next step? What is the reaction to this from nations that have already announced sanctions? Hmm, this is the concerning part because reading the tweets coming one cannot now discount that energy sanctions could very well be forthcoming, I don't think they will, but I would argue that the probability of that has increased, I don't think anyone could argue with that. This leads on to bigger questions, let's bear in mind that Russia is the world’s second biggest oil producer and provides between 30 - 40pct of natural gas to Europe. Clearly any sanctions on energy production are going to cause a huge spike, by how much is anyone's guess but it does seem that an aggressive headline is worth about $5 per bbl.?However, and I insert this caveat against all that I'm saying above, we are in total unknown territory this morning. What do OPEC+ do from here? This will be a conversation that I'm sure is already going on and perhaps those who are able to increase production, will have to because oil is in real danger of hitting record highs if the current situation is maintained. Stats later, but trust me, nobody will be taking much notice of those. Every news feed on. Good day.