Oil goes nuts: Don’t panic…but before you read this, go and fill the car up
Link copied to
Umm…Brent crude — the global oil benchmark — just surged another 20% this morning to a smudge off US$140.
That’s doing a lot of scary things in Asian trade, aside from hitting US futures for six.
Oil stocks on the local benchmark are up about 5% in the early going, but the ASX 200 itself is already on track for its lowest close in more than a week.
Ben Goodwin – portfolio manager and energy analyst over at Merlon Capital told Stockhead, the entire market is caught in the headlights of the Ukrainian conflict.
“The longer the situation in Ukraine is allowed to continue, the greater the destabilisation on global trade flows, most notably oil… but also coal and gas,” Goodwin warned.
Overnight US Secretary of State Antony Blinken got the market nice and anxious, saying the Biden administration was already on the blower to Europe about hitting the Russians where it would really hurt – slapping a big fat oil embargo on essential Russian supplies.
Remember Brent already made a crude 21% surge last week – the cost of the stuff has doubled in the past four months!
Now Blinken also has his people – very actively, he says – putting the screws on Poland to send in its (Russian made) fighter jets, saying the US would ‘backfill’ supply, ie: we’ll reimburse you what gets shot down with shiny new US planes.
And with the images of dead children on the streets of Ukraine’s Irpin where Mayor Alexandar Markushin said evacuating families were shelled before his eyes – there’s tougher talk on the floor of the US Congress pressuring the administration to go the whole hog in hurting Russian President Vladimir Putin and his inner circle by capping exports and scuttling Moscow’s key money spinner.
OPEC+ is already making a mess of its production targets.
For example, political upheaval in Libya has left oil production slipping under 1 million barrels a day, while Saudi Arabia raised its Arab Light crude by nearly US$5.00 for Asia’s April shipments above its benchmark.
And while Iran might be an option as the EU-Anglo-US alignment re-map Tehran’s nuclear program, the current onerous oil sanctions won’t likely be zapped until the third quarter.
The stupendous spike in crude oil prices has the IMF seriously messing with its outlook for economic growth and inflation and it’s looking hideously like the bad days of disco when 1970’s-style stagflation was the fashion alongside bell bottoms and sideburns.
For the uninitiated, the 1970’s was a dark time for fans of well-groomed teens, cheap petrol and – equities investors.
And for the better part of a decade, the S&P 500 went absolutely nowhere.