Source: Economic Reference Newspaper
Affected by the sudden tensions in Russia and Ukraine, the price of Brent crude oil futures in London has exceeded $100 per barrel for the first time in more than 7 years. Analysts pointed out that the escalation of the conflict between Russia and Ukraine will increase the risk of an impact on the global energy supply, and the US inflation situation will be more severely affected by this, thus affecting the US economic recovery process.
The price of cloth oil futures broke through 100
Russian President Putin made a televised speech in the early morning of the 24th, saying that he decided to launch a special military operation in the Donbass region. U.S. President Joe Biden then issued a statement saying the United States and its allies and partners would respond in unison and firmly. U.N. Secretary-General António Guterres called on Russia to withdraw its troops, stressing that "this conflict must cease immediately."
Affected by this, the outside world is worried that the global energy supply will be hit, stimulating the soaring price of crude oil. The London Brent crude oil futures price broke through $100 a barrel in intraday on the 24th, rising above $102 at one point, and the most recent time it was above $100 a barrel was in September 2014. The price of light crude oil futures for April delivery on the New York Mercantile Exchange also rose as high as $97.4 a barrel at one point.
After Putin's speech, the Moscow Stock Exchange stock index, one of Russia's two major securities trading indices, opened low in early trading on the 24th, falling nearly 10% at one point. About 2 hours after the opening of the market, the exchange announced a suspension of trading, and after the restart of trading, the stock index continued to fall heavily, falling more than 40% intraday. As of 12:00 Moscow time on the 24th (17:00 Beijing time), another important russian stock index, the Russian trading system stock index denominated in US dollars, fell by nearly 50%.
Global stock markets have also plunged sharply. The three major U.S. stock index futures indexes collectively fell sharply, with the Dow Jones Futures Index falling more than 700 points, down 2.2%, and the S&P 500 Futures Index and the Nasdaq Industrial Futures Index falling 2.3% and 2.8% respectively. In the Asia-Pacific market, the Nikkei 225 fell below the 26,000 mark for the first time since November 2020; the Korea Composite fell 2.35% at one point; and australia's S&P index fell nearly 3% at one point.
Russia is a major exporter of oil and gas. The data shows that Russia's crude oil supply will account for 29% of Europe's total crude oil imports in 2021 and 7% of global crude oil exports. The IEA has previously said it needs to pay close attention to the impact of the situation on the energy market, and the IEA member states are ready to take collective action to ensure that the global oil market is well supplied.
Some analysts pointed out that the risk premium given to crude oil by geopolitical events may drive the focus of oil prices to continue to rise. But geopolitical risks mainly amplify oil price volatility.
According to Reuters, JPMorgan Chase expects on the 23rd that the average oil price in the second quarter of this year may rise to $110 / barrel driven by the continuous escalation of the Ukrainian crisis; JPMorgan analysts wrote in a report that crude oil prices may continue to be high in the next quarter, and then fall back to an average of $90 per barrel at the end of this year.
Agence France-Presse analysis said that at present, under the influence of multiple factors such as the decline in US inventories exceeding expectations, the extremely cold weather overseas caused by crude oil production cuts, the geopolitical situation is uncertain, and the growth of crude oil demand due to the strengthening of global economic activities, crude oil prices may continue to fluctuate upwards.
The United States may release its strategic reserves of crude oil again
Analysts pointed out that the united States imposed sanctions on the "Nord Stream-2" company, coupled with Germany's suspension of the certification process for the "Nord Stream-2" project, which delivers natural gas from Russia to Germany through the Baltic Sea, is bound to push up global oil prices. The United States may continue to release strategic reserve crude oil.
According to the American Automobile Association (AAA), the price of unleaded gasoline in the United States reached $3.54 per gallon on February 23, up 91 cents year-on-year and 22 cents month-on-month. Analysts expect gasoline prices to break above $4/gallon amid tensions in Russia and Ukraine.
The U.S. Consumer News and Business Channel quoted Mark Zandy, chief economist at Moody's Analytics, as saying that oil prices could rise by $10 or $15 per barrel due to the volatile situation in Russia and Ukraine. If the conflict persists, unleaded gasoline could rise by about 30 or 40 cents per gallon, equivalent to a half-percentage point increase in inflation year-over-year.
According to the Wall Street Journal, in response to the rise in oil prices that may be triggered by us sanctions against Russia, White House press secretary Psaki said on the 23rd that if regional tensions escalate further and cause oil and gasoline prices to soar, the Biden administration is considering using the US strategic oil reserve again. The U.S. has yet to make a decision on the issue, but there is an "active dialogue" within the administration, including potential price triggers and how to coordinate the release of oil reserves with other countries to ensure more supply in the market when prices rise, people familiar with the matter said. Modelling is currently underway to determine the size and extent of potential releases of reserve oil.
The White House believes that the release of reserve oil has reduced the price of gasoline in the holiday driving season by about 10 cents per gallon. But rising fuel and consumer prices would still jeopardize Democratic control of the House of Representatives, and the White House faces pressure to control prices. Last November, the U.S. Department of Energy released 50 million barrels of crude oil from the Strategic Petroleum Reserve and joined forces with India, Japan, South Korea and others to address the oil supply-demand mismatch that arose as the global economy recovered from the COVID-19 pandemic.
Japanese and Australian officials said on the 24th that they are ready to use crude oil reserves to cope with the impact of the situation in Ukraine on energy supply.
Rising oil prices have increased inflationary pressures
Carsman, chief economist at JPMorgan Chase, pointed out that oil price growth increases the upward pressure on inflation, and raising interest rates during the period of oil price rise will further impact economic growth, which will add pressure to the Fed's future monetary policy path choice.
RSM chief economist Joseph Brucius said on the 22nd that the energy shock caused by the situation in Russia and Ukraine will reduce the gross domestic product (GDP) of the United States by 1% in the next year and push the inflation rate up by 2.8 percentage points in the next three to six months. The BlackRock Investment Institute said on the 22nd that the Fed may be forced to coexist with high inflation, because using aggressive monetary policy to counter supply-driven inflation will only destroy economic activity that has not yet fully resumed.
The minutes of the January monetary policy meeting released by the Federal Reserve on the 16th show that due to the continued high inflation in the United States, the Fed may raise the interest rate level as soon as March. Combined with top Fed officials and widespread market forecasts, the Fed may raise interest rates by 25 basis points at its March meeting, and then begin to shrink its huge balance sheet and gradually normalize monetary policy. However, economists worry that an escalation in Ukraine will trigger higher oil prices, rising inflation and large stock market volatility, and the Fed's short-term monetary policy outlook will be more uncertain.
Affected by the sudden change in the situation in Russia and Ukraine and other factors, there is great uncertainty in the policy and capital market trend expectations of global central banks, and the expectation of interest rate hikes has eased slightly. Markets are currently concerned that expectations of a recession triggered by high oil prices could slow the pace of interest rate hikes by European and American central banks.