The storm subsides, at least temporarily, in the oil market. The barrel of brent -the benchmark in Europe- falls below 100 dollars per barrel this Tuesday for the first time in two weeks and is one step away from its level before Vladimir Putin ordered the invasion of Ukraine. Behind this relaxation, which is a breath of fresh air for importers (the EU and the great Asian powers, except Indonesia) and which makes it possible to think of less pressure on price indices, is the resurgence of covid-19 infections in China —which has forced the confinement of its third largest city, Shenzhen— and the expectation of progress in the talks between Moscow and kyiv for a ceasefire. Both gasoline and diesel, however, remain at record highs.
From almost $130 to less than $100, in just one week. Although the ban on production from Russia —the world’s second largest exporter, with a global market share of close to 10%— in the United States and the United Kingdom constrains the market, investors seem content with the more benign narrative: that which indicates that, although the war ends up being long, the initial reaction in the parks was perhaps exaggerated. In recent sessions, European stock markets have also recovered much of the ground lost in the early stages of the invasion. The lower price of crude oil also has a sectoral reading: the airlines, one of the industries most affected by the war, show their best face on the stock market this Tuesday, with widespread increases among the big European names.
The other novelty this Tuesday in the oil market comes from Saudi Arabia -the world’s leading exporter-, which is considering accepting yuan and not just dollars in its sales to China. The news, advanced by the Dow Jones financial information agency, is important for two reasons: because it threatens the global sovereignty of the dollar in commodity transactions and because it shows the cooling of relations between Riyadh and Washington just when the West most needs OPEC (the oil cartel led by the Saudis) to reopen the supply tap and thus relax the price of crude oil. A measure that The US government has long claimed but for now has fallen on deaf ears.
Natural gas rises after retreating almost 50% from highs
Natural gas is the other side of the coin this Tuesday. After leaving behind the historical peak of almost 230 euros per megawatt hour (MWh) marked last Monday in the European market, it resumes the upward path to 120 euros on Tuesday. Here yes, the fear of a supply cut from Russia continues to weigh on the mood of the market after in recent hours the arrivals of this fuel through the Yamal gas pipeline -which travels from Russia to the EU via Belarus- remained zero and that the president of the European Commission, Ursula von der Leyen, advocated this morning to “maintain pressure” on Moscow until the military occupation of Ukraine ends. Russia supplies almost 40% of the gas consumed in the Twenty-seven, but in some countries of Central and Eastern Europe the dependency is total.
He knows in depth all the sides of the coin.
All in all, Ron Smith, an analyst at the firm BCS Global Markets, underlines in statements to Bloomberg that the underlying dynamics point to a “reduction in the geopolitical risk premium in Europe, given that it does not seem likely that Russian flows will be interrupted. short term”. This thesis is reinforced by two other factors: Russian gas through Ukraine continues to flow normally through Ukraine, oblivious to the military confrontation, and a closing of the winter season with temperatures higher than the historical average for this period. That means a lower need for heating and, therefore, also a lower consumption of reserves, which have been shivering for months.