Oil commentary - 27 January 2022

Morning all.?Brent is trading down 0.67 at $89.29 this morning and WTi is trading at $86.70 down 0.65.?Define irony.?A Wall Street banker being interviewed about financial results stating COVID is in the rear-view mirror whilst working from home.?Because of COVID.?It is quite an extraordinary world we find ourselves in right now.?The oil market now has so many moving parts to it that I feel like I work in a LEGO factory (other children’s toys are available). Brent touched $90 per bbl yesterday, a feat not seen since the 13th October 2014. Goldman Sachs yesterday said that "…expectations of a limited disruption to energy flows despite tensions between Russia and Ukraine.?Furthermore, an impact from a possible oil or gas pipeline outage in Ukraine should be modest because Russia can reroute flows away from Ukraine and use other pipelines instead".?This was always the case to be honest, but as is the way of an oil bull he or she will ignore any of that realistic nonsense and jolly well buy the fact that it adds to the "supply disruption" argument. Over the pond and we had EIA data out last night which showed builds on crude and gasoline stocks and draws on distillates.?Gasoline stocks are now at the highest since February 2021.?Ignore that though.?Once again however, the distillate side of the barrel is proving to be performing really rather splendidly, with stocks drawing over 4mn bbls on the back of exports picking up as demand continues to draw in from Latin America. What the market was really focused on yesterday was Jerome Powell and the first FOMC meeting of 2022 - "The committee is of a mind to raise the federal funds rate at the March meeting assuming that the conditions are appropriate for doing so," said Powell. This is the one part that caught my attention though - Powell was explicit on one key point: that with inflation high and for now apparently getting worse, the Fed this year plans to steadily clamp down on credit and end the extraordinary support it has provided to the U.S. economy during the coronavirus pandemic.?Basically, that's an "Oi lads!?And you ladies too.?Get in here! The party is over!".?Let’s see how that pans out - doesn't sound like things are particularly "transitory" Mr Powell. Back over the pond again, wow I'm like a water boatman today.?To me the real story about Russia/Ukraine tensions centres around wheat, check this out "In the case of an invasion and an extreme retaliatory blanket embargo on Russia and occupied Ukraine, the international market will be deprived from the largest and the third largest wheat exporter in the world (not counting the EU as a block). In a relatively short time, a huge amount of wheat could be removed from the international market. Russia is exporting 35mmt and Ukraine 24mmt in the current season. The combined of 59mmt is equivalent to a massive 29% of global exports.". Thanks to Rabo Bank for that. Hmmm. Doesn't help the inflationary argument, does it??Like I said, lots of moving parts, try and concentrate on one if you can though.?Good day.