The war in Ukraine continues to push the prices of raw materials and in particular the price of oil with Brent which rose to over $ 119 per barrel, the highest since August 2013, while the WTI went up to area 116 $.
Also contributing to a new price surge in the past few hours is the possibility of the US cutting oil imports from Russia. This hypothesis was reported by US Deputy National Security Advisor Singh, in an interview with CNN.
In general the effects of sanctions on Russia which fueled fears about the interruption of the supply of black gold. Major oil buyers are rushing to seek alternative oil sources to Russian crude and if the situation worsens, the risk of a tightening of supply would increase.
Meanwhile, yesterday Opec + has in fact ignored the geopolitical situation, confirming the path of gradual increase in the offer prepared in recent months. Russia is the third largest oil producer in the worldin addition to being one of the main exporters, in fact, about 60% of Moscow’s exports go to Europe which pays around 800 million a day for Soviet crude oil. In yesterday’s meeting, OPEC + decided, despite the request for greater efforts, to keep the daily increase in production at 400,000 barrels and this did nothing but fuel supply fears.
After Putin’s invasion of Ukraine, Brent prices have risen by 16% and continue to race despite the United States and 30 other countries claiming that they will release over 60 million barrels from their strategic reserves to stem the complex situation.
The International Energy Agency (IEA) has warned that global energy security is at risk and despite the release of crude oil reserves by many countries it has done little to quell market fears. The agency also reported that U.S. crude oil inventories have fallen by 2.6 million barrels in the past week alone, as have shrunk gasoline supplies.
Brent in Backwardation, che significa?
If we look at the price structure of oil futures contracts we see how we are in the presence of a rare situation: Brent is in Backwardation. To understand what this means, we must start from the Forward curve which is constructed by placing the prices of the futures on the vertical axis while on the horizontal one all the maturities of the futures (from the closest to the furthest). In theory it is normal to have rising prices but as you move away in time, situation of Contangowhere the Forward curve has a positive slope, but this is not always the case.
The Backwardation situation occurs when the slope of the Forward curve is negative and therefore the closest maturities have higher prices per barrel than the immediately following maturities. This situation occurs when there is nervousness and the supply of oil is in tension failing to meet the demand and this deficit causes prices to explode on the first maturities.
In this context, investment banks are increasingly raising their oil estimates. Goldman Sachs expects oil (WTI) to reach $ 115 a barrel by the end of the month in a base scenario where there is no total shutdown of Russian supplies. In the worst case scenario, the investment bank expects crude oil at $ 150 a barrel.
The generalized increase in the prices of raw materials that we are witnessing shows its effects oninflation. Inflation in the euro area jumped to + 5.8% in February, above the consensus of 5.6%, and according to many analysts we have not yet reached the peak.