On March 1, affected by the escalation of tensions between Russia and Ukraine, international oil prices surged sharply. The main contracts of WTI crude oil and Brent crude oil both exceeded the $100/barrel mark, setting a new high since 2014. WTI crude oil once rose by more than 11% during the session. . As of the close, the NYMEX WTI crude oil futures April contract rose 8.0% to US$103.41/barrel; the ICE Brent crude oil May contract rose 7.1% to US$104.97/barrel.
Zheng Mengqi, an energy researcher at Hizheng Futures, said that at present, both Russia and Ukraine are relatively firm in their positions, which has increased the difficulty of negotiations between the two parties. The negotiation process will be repetitive, tortuous, and changeable, and the time cycle will be greatly lengthened, which will also Increase uncertainty in the crude oil market.
Judging from the results of European and American sanctions, some Russian banks have been excluded from the SWIFT payment system. Zheng Mengqi believes that due to the high energy dependence of many European countries on Russia, completely excluding Russian banks from the SWIFT payment system will not only affect Russia’s energy exports, but also affect Europe’s energy imports. Russian crude oil production accounts for more than 10% of the global crude oil supply. About 1 million barrels of Urals crude oil are transported to Europe through the Druzhba pipeline every day, and 1.5 million to 1.8 million barrels of Urals crude oil are transported to Europe through the Baltic Sea ports of Primorsk and Ust-Luga and the Black Sea Novorossiisk port. Therefore, compared with Iran being excluded from the SWIFT payment system twice in 2012 and 2018, European countries are relatively cautious in handling the Russian issue this time. Moreover, OPEC member states have limited capacity to increase production. If the idle production capacity of Saudi Arabia and the United Arab Emirates is sacrificed to supplement Russian crude oil production, the risk on the crude oil supply side will increase.
“Affected by rising geopolitical risks, crude oil prices have risen to highs in recent years, and its potential negative factors cannot be ignored.” Zheng Mengqi said that the United States and its allies are considering releasing about 60 million barrels of strategic crude oil reserves to ease short-term supply concerns and ensure that OPEC The production increase is maintained at the upcoming meeting. Iran stated that more than 98% of the nuclear agreement has been completed. If the Russia-Ukraine crisis continues to worsen, it cannot be ruled out that the United States will accelerate the Iran nuclear agreement and increase crude oil supply by returning Iranian crude oil to the international market, thereby suppressing oil prices. In addition, high oil prices also increase the possibility of the Federal Reserve raising interest rates aggressively.
Zheng Mengqi said that overall, low inventories coupled with geopolitical risks have pushed crude oil prices up sharply. If the situation between Russia and Ukraine enters a tug-of-war mode, oil prices will remain high; if the situation worsens and the conflict escalates, there is still room for oil prices to rise. The current market uncertainty is high and it is recommended to operate with caution.
An Ziwei, a senior analyst at the Orient Securities Derivatives Research Institute, said that short-term risk premiums will rise further and oil prices may rise further. From a fundamental perspective, the impact of the COVID-19 epidemic on demand has subsided, most OPEC+ countries are close to their production capacity limits, and the situation that supply growth is lower than expected is gradually priced in. Large-scale shale oil producers in the United States are still relatively cautious about the scale of capital expenditure expansion and production growth expectations this year, and the United States maintains a moderate production increase trend. The decline in idle production capacity and low inventories will continue to be positive for oil prices, and the upward trend of oil prices will continue.
Yan Lili, senior crude oil researcher at Xinhu Futures, said that the core logic of recent oil price transactions is still the situation between Russia and Ukraine. In addition, we need to pay attention to the progress of the US-Iran negotiations. In terms of fundamentals, supply is still tight, demand is average or may weaken, and inventory levels are low.
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