Panic caused by the situation in Russia and Ukraine continues to spread
The competition between energy powers has caused an earthquake in the market
The industrial chain surged in response, and manufacturers collectively raised prices.
In 2022, who is the winner in troubled times (city)?
On the 24th, Russia’s war on Ukraine triggered a global rush for safe-haven assets. The price of international oil benchmark Brent crude oil rose by more than 4 US dollars per barrel, exceeding US$100 per barrel for the first time since September 2014. With the war, It continues to climb above $102 a barrel.
The escalation of the situation between Russia and Ukraine also caused global stock markets to fall across the board. As of around 11:30, U.S. stock index futures continued to fall, with Nasdaq futures falling nearly 2% and entering a technical bear market for the first time since March 2020. S&P 500 futures fell 1.5%, and Dow futures fell 1.44%.
Asia-Pacific stock markets fell across the board during the trading session. Among them, Australia’s S&P 200 Index and Hang Seng Index fell more than 3%, Nikkei 225 Index and Korea Composite Index fell more than 2%, and the Shanghai Composite Index fell 0.89%.
Russia-Ukraine situation drives market
Crude oil prices may be supported in the short term
In the short term, continued tension in the geopolitical situation has pushed up crude oil risk premiums to high levels. The upside of oil prices depends on the extent of the escalation of the Russia-Ukraine conflict. If the situation worsens and leads to continued supply disruptions, it may push oil prices further upward; if the conflict can be peacefully resolved through diplomatic channels, it will help ease the upward pressure on oil prices. In the medium term, the accelerating pace of tightening by European and American central banks will increase financial pressure, and the accumulation of reserves when supply rebounds exceeds demand is expected to increase supply and demand pressures. When financial and supply and demand pressures materialize, the suppressive force on oil prices will gradually increase.
From the current point of view, the expected changes in supply are tight. In the long term, OPEC is expected to continue to maintain a moderate growth trend. However, in the short term, changes in expectations including the situation in Ukraine and Iran negotiations are driving the market. Demand may remain stable in the long term, but may expand further in the short term. Overall, crude oil prices may be supported in the short term, and we need to pay attention to the risks of supply changes and sentiment shifts.
Russia may be subject to new round of sanctions
There is a high probability that energy prices such as PTA will rise again
Since 2022, under the influence of strong fundamentals and tensions between Russia and Ukraine, international oil prices have increased by 23%, reaching a record high since August 2014. In addition, the price difference between the east and west regions, represented by the price difference between Dubai and Brent oil, has further weakened. The outbreak of armed conflicts and later sanctions from Western countries may affect the export of Russian oil and gas resources. The United States and Europe have vowed to impose new sanctions after the conflict escalated. Once Europe and the United States implement sanctions, it will once again threaten European energy supply and will most likely push up energy prices again.
It is expected that if the United States and Europe adopt “sanctions” to stimulate the situation in Russia and Ukraine, crude oil will still have further room to rise, and the high prices of related raw materials will continue to support it. Russia is one of the countries with the largest crude oil production in the world, with production holding steady at 230.25 million tons (including condensate gas) since 2019, and showing a steady growth trend. Its energy supply has a huge impact on the world structure. As the most important raw material for energy and chemical products, the rise in the price of crude oil directly pushes up the cost of energy and chemical products. At present, domestic oil products are mainly rising. Among them, asphalt, fuel oil, PTA and LPG in the oil chain are the most affected. Products such as ethylene glycol and polyolefin are weak due to weak supply and demand.
Therefore, the impact of the Russia-Ukraine conflict on bulk chemicals will be realized through the rise in oil prices. Russia is the world’s second largest oil and natural gas producer. If Russia is sanctioned, oil and gas prices will rise. As representatives of the petrochemical industry, PTA, Styrene is bound to rise in line with rising oil prices.
The polyester product line has been affected by frequent fluctuations in recent times.
Beware of sharp rise and fall in oil prices!
Analysis of price trends cannot be separated from the analysis of comprehensive supply and demand relationships. At present, the world economy is showing signs of recovery, and oil demand has begun to rebound. The market generally believes that the supply side is still unable to match the recovering demand. In addition, there have been production problems in crude oil producing areas recently. Under the tight supply of crude oil, the conflict between Russia and Ukraine has intensified. The news significantly pushed up crude oil prices. In fact, judging from historical sanctions, the United States and Europe are more inclined to weaken Russia’s long-term energy production capacity than directly restrict Russian crude oil exports. If the United States and Europe continue their original sanctions against Russia this time, the conflict between Russia and Ukraine will not have much impact on the short-term supply and demand of crude oil. However, judging from the drastic fluctuations in crude oil prices caused by the current news changes, crude oil prices will be more affected by market sentiment in the short term. The polyester product line has been subject to frequent fluctuations in recent times due to the influence of crude oil, so we still need to be alert to the worsening of geopolitical conflicts.or improvement caused by sharp rises and falls in crude oil prices.
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