Thu. Sep 29th, 2022

Prof. ST Hsieh

Director, US-China Energy Industry Forum

626-376-7460

[email protected]

March 1, 2022

War in Ukraine is still raging with the first face-to-face peace talk between Russia and Ukraine on Monday, February 28, 2022, yielded only an agreement that the two sides will meet again soon. Unfortunately, cease fire is not expected anytime soon. At the same time, US led financial sanctions are punishing Russian economy, but global financial market is rattled too. Specifically, energy prices surged on Tuesday, March 1, 2022, despite new measures aimed at calming markets worried by the invasion of Ukraine.

WTI Crude Oil

The West Texas Intermediate Crude Oil market has shown itself to be very resilient. At this point, it looks like the market is ready to go much higher from $107.

Brent Crude Oil  

Today’s price is $110, it is obviously a very bullish market. 

Natural Gas

The $4.50 per MMBTU (Henry Hub) seems to be the nominal price of gas, as the natural gas markets will continue to weigh the idea of potential problems with Gazprom in Europe.

The crude oil prices are of major concern for the US and her allies. Because higher oil prices mean higher gasoline prices and drive the already high inflation rate to even higher threatening economic stability.

The International Energy Agency for 31 OECD countries has immediately agreed to release total 60 million barrels of their Strategic Petroleum Reserves (SPR). Sixty million barrels of crude oil sounds like a big deal, but it only amounts to 60% of the world’s daily oil consumption.

The US will release 30 million barrels, the rest 30 million barrels will be allocated to the rest 30 countries based on the individual situation of these nations.

STH Comments

  1. Releasing SPR is merely sending a signal to the global oil market. The impact on global oil price is minimal, any commodity price is determined by the balance of supply and demand.
  2. Sixty million barrels of crude oil is just a drop in the bucket: it is too little.
  3. SPR release is a timing consuming process, there is no way to coordinate the release by 31 countries at one-given time to make any impact: it will be too late.
  4. The real purpose of releasing SPR is to tamper the local gasoline price.
  5. The US will have to try encouraging domestic oil production, but it won’t be easy.

NHK

Member countries of the International Energy Agency have agreed to release 60 million barrels of oil from their reserves.

The IEA made the decision at an extraordinary online meeting of ministers on Tuesday. Its members include Japan, the United States and European countries.

The ministers shared the view that member states need to work together to stabilize the energy market, amid the Russian invasion of Ukraine.

Sixty million barrels are equivalent to about 60 percent of the world’s daily oil consumption. The US will release half of the volume. The allocation of the remaining 30 million barrels will be decided, based on the situation of the other members.

After the meeting, Japanese Economy, Trade and Industry Minister Hagiuda Koichi told reporters that the international community does not tolerate Russia’s aggression.

He stressed the significance of the global community demonstrating solidarity to overcome the difficulties.

The energy agency’s joint release of oil reserves is the first such action in 11 years. Fighting in Libya during 2011 between then Muammar al-Qadhafi’s regime and anti-government forces disrupted crude oil exports.

The IEA plays a leading role in the release of stockpiles required by member countries when the supply of oil becomes tight due to crises or disasters.

BBC

Ukraine conflict: Oil prices hit 7-year high despite emergency measures

Published March 1, 2022.

Brent crude – the international benchmark for oil prices – jumped 10% to $107 a barrel, marking the highest level seen in more than seven years.

It rose after the International Energy Agency’s members agreed to release 60 million barrels of oil from emergency stockpiles.

Russia is one of the biggest energy producers in the world.

As a result, concerns about Russia’s invasion of Ukraine have sparked concerns among investors that oil or gas supplies could be affected.

Price rises were steeper in the US, where West Texas Intermediate crude increased by 11% to $106 a barrel.

The United States and 30 other member countries of the International Energy Agency (IEA) agreed to release the oil in a bid to stabilize energy markets worldwide.

“We are prepared to use every tool available to us to limit disruption to global energy supply as a result of President Vladimir Putin’s actions,” White House spokeswoman Jen Psaki said on Tuesday.

She added that Washington would carry on looking at how to speed up moving energy supplies away from Russia.

Another statement by the IEA noted that the invasion of Ukraine came against a “backdrop of already tight global oil markets, heightened price volatility, commercial inventories that are at their lowest level since 2014”.

Petrol price movements in the UK are mainly determined by the price of crude oil, which is the raw material for fuel, and the exchange rate between the dollar and the pound, because oil is traded in dollars.

On Monday, the RAC said the average price of petrol had jumped to a record high of £1.51 a litre on Sunday, while diesel increased to £1.55.

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