Market update - Crude oil:
For the last month we can observe that the underlying crude oil price has surged from $78,18 to $86,67.
A good increase of 10,85% MoM (month over month), but what has caused this tremendous increase in price, for such a deep liquid commodity?
For the last month we can observe that the underlying crude oil price has surged from $78,18 to $86,67.
A good increase of 10,85% MoM (month over month), but what has caused this tremendous increase in price, for such a deep liquid commodity?
As we know Crude oil has a high correlation with Brent and with the two wars continuing in Europe (Ukraine and Russia) and the Middle-East (Israel and Palestina), we see that there is a immediate impact on the price. Being that Russia is a big producer of Crude oil and Iran is a big producer of Brent oil.
From the war in Ukraine, there has been reports that Ukraine has attacked a oil refinery in Russia. Such an attack will upset the stability of crude oil production. Resulting in a higher price since production capacity are being stripped and demand has continued to rise, forcing a higher price due to the law of scarcity. The oil market as a whole (both brent and crude) is a very sensitive market. So whenever we so such events happen. Or any type of events that will impact the production or consumption of the product, it will have immediate consequences.
From the war in the Middle-East, there has been a attack on the embassy of Iran, in Syria (Damascus). Iran has claimed this attack was lead out by Israel. In the attack two Iranian generals and five military advisers were killed. Iran has responded, by saying that they are able to punish the perpetrators of this crime and its supporters. If there are any further escalations or any miscalculations where Iran get's involved, than this could lead to a broader conflict where the oil price will be impacted. Most likely resulting in higher oil price.
The underlying asset is now trading at close to $90 per barrel, which awakens another important issue. Saudi Arabia.
Saudi Arabia has previously pointed out that in order for them to finance their vision 2030, the oil price must reside at least $90 per barrel. Since Saudi Arabia and Iran are both OPEC countries with close ties and are both big oil producers. There might be room to negotiate something in order to keep the oil price at it's current price level.
Market update - Natural Gas:
The Natural gas market has however seen a negative price development in the last month. The market has seen it's price drop from approximately from $1,914 to $1,785. A negative development of 7,22% MoM.
Previously in (from 2008 and beyond) natural gas and oil did move somewhat in tandem, but after 2008 the correlation has been weakened.
Now when looking at the last weekly newsletter (published by EIA) we can possibility for the price drop over the last month:
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Our next post will be within 2 weeks from now.
From the war in Ukraine, there has been reports that Ukraine has attacked a oil refinery in Russia. Such an attack will upset the stability of crude oil production. Resulting in a higher price since production capacity are being stripped and demand has continued to rise, forcing a higher price due to the law of scarcity. The oil market as a whole (both brent and crude) is a very sensitive market. So whenever we so such events happen. Or any type of events that will impact the production or consumption of the product, it will have immediate consequences.
From the war in the Middle-East, there has been a attack on the embassy of Iran, in Syria (Damascus). Iran has claimed this attack was lead out by Israel. In the attack two Iranian generals and five military advisers were killed. Iran has responded, by saying that they are able to punish the perpetrators of this crime and its supporters. If there are any further escalations or any miscalculations where Iran get's involved, than this could lead to a broader conflict where the oil price will be impacted. Most likely resulting in higher oil price.
The underlying asset is now trading at close to $90 per barrel, which awakens another important issue. Saudi Arabia.
Saudi Arabia has previously pointed out that in order for them to finance their vision 2030, the oil price must reside at least $90 per barrel. Since Saudi Arabia and Iran are both OPEC countries with close ties and are both big oil producers. There might be room to negotiate something in order to keep the oil price at it's current price level.
Market update - Natural Gas:
The Natural gas market has however seen a negative price development in the last month. The market has seen it's price drop from approximately from $1,914 to $1,785. A negative development of 7,22% MoM.
Previously in (from 2008 and beyond) natural gas and oil did move somewhat in tandem, but after 2008 the correlation has been weakened.
Now when looking at the last weekly newsletter (published by EIA) we can possibility for the price drop over the last month:
The data shows us that the working gas in storage has gone, entailing that the amount of gas being circulated has increased. In short, the supply is greater than demand and therefore, a price drop is the natural response.
This can be confirmed by looking at the same weekly newsletter by EIA:
-In these two tables we can see that EIA has reported that the Total supply (105,6) has been greater than the total demand (105,2). Confirming that a "natural" price drop.
Concluding:
For the short-term (1-2 months) we might expect the price for crude oil to stay the same or increase, due to the international conflicts that are mentioned. Pluss ships being attacked outside of Yemen, by the Red-sea. These issues are highly unlikely to be fixed in the next 1-2 months, making it more plausible that the price fluctuate around $90 for next 1-2 months.
For the short-term (1-2 months), in terms of natural gas. It is harder to predict what the outcome might be. Russia is one of the biggest producers of natural gas and if the war escalates further into to Russia, we might see a price increase in the following months, if the production capacity is reduced.
For the short-term (1-2 months) we might expect the price for crude oil to stay the same or increase, due to the international conflicts that are mentioned. Pluss ships being attacked outside of Yemen, by the Red-sea. These issues are highly unlikely to be fixed in the next 1-2 months, making it more plausible that the price fluctuate around $90 for next 1-2 months.
For the short-term (1-2 months), in terms of natural gas. It is harder to predict what the outcome might be. Russia is one of the biggest producers of natural gas and if the war escalates further into to Russia, we might see a price increase in the following months, if the production capacity is reduced.
Thank for you for taking the time to read our blog!
Our next post will be within 2 weeks from now.
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