the Ukraine crisis triggers the worst forecasts

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Oil is experiencing one of its most delicate moments. After reaching its highest price since 2014, it seems that during this 2022 it will continue to climb at prices unthinkable just a couple of years ago. The bull market, but above all the fear that it will continue to rise, has led to thousands of barrels of oil being paid in the future at 100, 110, 125 and even 150 dollars, according to reports Bloomberg.


An antagonistic situation: from the pandemic to the crisis with Ukraine. In just over a year, the oil market has come full circle. If during the pandemic consumption was at a minimum and there were no trips, now the economy is resurfacing again and has coincided in time with the crisis in Ukraine, which directly affects the oil market as Russia is a large producer.

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Javier Blas, an energy market analyst, explains that the price of future options has multiplied by 15. A year ago, a barrel of oil reaching $125 by the end of 2022 was paid at 9 cents. Now at $1.35. That is, the “bets” that oil will reach that price are much more feasible now.

The uncertainty with Ukraine means that the price wheel does not stop turning. The price of oil is paid in anticipation of what is expected to happen. As the forecasts with Russia are not good, many buyers decide to keep their options waiting for the final price to exceed them and they can come out ahead. It is the fish that bites the tail, as we saw with the effect of the ‘shorts’ and the actions of Gamestop.

As the price of oil options rises, the banks that offered them find themselves wishing it didn’t go as high. But the solution is to protect yourself by buying futures at higher prices. A situation that follows its own dynamics, beyond oil production itself. Usually in February and March, when the producing companies show their numbers, it is when the situation calms down and the price stabilizes. But this year there are many factors that are out of the norm.

It is difficult for the price of oil to fall below 100 dollars. As described by Blas, the option to purchase a barrel of Brent at $100 for June 2022 increased by almost 140%. And that’s just what you see on the exchange market. This leads us to think that the price of oil will hardly go below, when there are so many investors who have put large amounts that that price will be reached.

It is not clear that oil will reach $150, but it is heading there and there are already some investors who have put that level in their futures options.

The latest moves by Russia have once again sent the price of oil skyrocketing. And it may be the beginning. Russia is a large oil producer, with some 10.27 million barrels per day in 2021 and the forecast to increase to 11 million in 2022. Following Putin’s statement, the market has reacted with a new escalation. In Asia, the barrel has risen 3.72% to 94.46 dollars and Brent rose 2.75% to $98.14. It is a reaction movement in the face of a crisis, that of Ukraine, which unfortunately seems to still have many episodes ahead of it.

Image | robin summer

Oil is experiencing one of its most delicate moments. After reaching its highest price since 2014, it seems that during…

Oil is experiencing one of its most delicate moments. After reaching its highest price since 2014, it seems that during…

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