The commodity complex is brimming with uncertainty, after the US hinted at replacing Russian crude oil and Russia seems to have intensified fresh attacks on Ukraine. Brent Crude prices shot up past $130/bbl in US trading, and there is no sign of oil cooling off. This sharp surge overnight seems to have derailed the outlook for crude oil for the rest of the week as well.
The latest setback came after US Secretary of State Antony Blinken told news channels, “We are now talking to our European partners and allies to look in a coordinated way at the prospect of banning the import of Russian oil, while making sure that there is still an appropriate supply of oil on world markets.”
Javier Blas, Energy columnist of Bloomberg tweeted a chart that underscored the peak panic in oil market. The high tested overnight by Brent crude was $139 per barrel.
The delay in closing negotiations with Iran over the nuclear deal is also adding to the supply concerns. JPMorgan in its recent note has warned that crude oil could test $185 per barrel this year, if the uncertainty does not subside. Even other oil expert had begun warning of a surge in crude prices as the crisis lingered on.
Vandana Hari, Noted commentator on crude prices and Founder of Vanda Insights tweeted saying, "US is discussing with EU allies a ban on Russian oil IMPORTS. If the EU does join in, what’s the obvious retaliatory measure for Putin? Turning off Europe’s gas supply!" The prices of natural gas in the UK and US have been shooting through the roof, all of last month. UK natural gas prices have been up over 150% over a month, and have more than doubled last week itself.
At the recent meeting of OPEC+ allies, there seemed reluctance to increase production supplies amid the ongoing turmoil in Ukraine. OPEC+ has been slow to meet the increasing demand, which meant dipping into reserves and dire forecasts of a price surge. The Ukraine-Russia war has thrown all maths out of the window. Undoubtedly, for commodity prices, this has been the strongest start to any year since 1915.
Read on why the spike in oil prices threatens to derail the shift to cleaner energy.
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