(BFM Bourse) – As Russia is the world’s second largest exporter of black gold, the explosiveness of the situation in Ukraine is raising fears about possible supply disruptions in a market that is already structurally in deficit. Nothing now seems to be able to prevent the barrel of crude from reaching 100 dollars.
Tendentially bullish for almost two years, the prices of the main world references of black gold have -again- reached new heights since 2014 this Tuesday morning, after the decision of Vladimir Putin to unilaterally proclaim the independence of the Ukrainian separatist territories. A barrel of Brent for delivery in May, which exceeded 96 dollars in the morning, traded at 94.5 dollars around 2:45 p.m., up 1.6% from the previous day. The same benchmark, for delivery in April, even climbed as high as $99.5 in Asian exchanges. The barrel of WTI for delivery in April takes him 3% to 92.9 dollars.
“The escalating crisis between Russia and Ukraine raises concerns about subsequent supply disruptions as sanctions risk crippling Russia,” the world’s second-largest oil exporter and the world’s largest exporter of natural gas , comments Victoria Scholar, analyst for Interactive Investor. “This is the worst escalation since the Cold War,” said Ipek Ozkardeskaya, analyst at Swissquote.
So what can we expect for the coming months? “Unless the United States and Europe throw Ukraine under the political bus and completely appease Putin, it seems inevitable that the barrel of Brent will hit $100 sooner or later,” said Jeffrey Halley, senior analyst at Oanda. “In the event of a large-scale Russian invasion, it should hit at least $130, taking WTI with it,” he adds.
And it will be “difficult”, according to him, “to see Brent going back below the bar of 90 dollars a barrel, OPEC + being limited in its ability to pump more” he recalls. “Not only are geopolitical tensions supporting the uptrend, but the fundamentals of strong post-pandemic demand coupled with constrained supply” are indeed structurally constructive for prices, corroborates Victoria Scholar.
While global demand for black gold has been picking up strongly for months and is expected to reach a new historic peak in 2022, higher than 2019, supply is still struggling to keep pace, with many producers (Venezuela, Kazakhstan, Libya or Iraq) currently experiencing supply disruptions. Even the two heavyweights of the enlarged alliance dubbed OPEC+, Saudi Arabia and Russia, are failing to meet their production quotas under the agreement reached last July.
Quentin Soubranne – ©2022 BFM Bourse