Oil commentary - 7 March 2022
Morning all.?Brent is trading this morning up 11.31 at $129.40 and WTi is trading at $125.76 up 10.08.?You know I remember the days when problems were problems like turning up to a drinking establishment an hour earlier than you thought happy hour started. "What do you mean 6pm?!!!".?Or walking on to a London Underground platform and seeing the next train is due in 3 minutes "Not waiting that long, I'll walk it, my phone has a torch".?Or going to a supermarket with a shopping list your other half has given you and finding out that they don't have that specific variety of potato that been written down (no substitute is acceptable, just FYI, nothing but a Maris Piper will do).?They were problems I could deal with. Just. But here we are, in a world that is coming out of a 2 year long pandemic and facing the worst crisis since the Second World War. Brent traded up to $139.13 this morning and has now "settled" at around $130 per barrel. The reason for such a spike this morning? Well, it really was a case of "Blinken you'll miss it" with US Secretary of State Antony Blinken saying that he is working with EU allies to look at banning Russian oil imports. Now, I mentioned last week that whilst there have been no official bans on Russian energy, the world is slowly but surely turning its back on Russia as nobody wants to end up with a cargo of distressed Russian oil so arguably, by default, the world has taken it upon itself to stop trading Russian oil. The thing is though is that is the discussion being had on how to replace Russian oil? I'll give you an example on what I mean by this, and I thank my very good friends at Kpler for their excellent research piece at the end of last week regarding fuel oil - 19pct of global fuel oil exports come from Russia.?Fuel oil is the primary bunker grade that the worlds shipping fleet uses. If Russian oil exports are banned how is that supply going to be replaced? The simple answer is - it can't. Hence why prices are gapping up so much every day.?It's not just oil.?Look at wheat futures - they have opened every day for the last four and have immediately hit limit up, which means the market closes. Wheat is up 30pct this year so far. Then we have things like potash and phosphate, key components in fertilisers. Half of global food production gets food as a result of fertilisers. I could go on and on. To put it simply I would say the world is in a crisis on more or less all commodities. $130 oil? I said $100 looked cheap this time a week ago.?I think $130 could look very cheap, very soon, sadly. Good day, and week to all.