International oil prices rose above $100 / barrel! With the escalation of the situation in Russia and Ukraine, what will the global oil and gas market usher in?

Tensions between Russia and Ukraine have further intensified

The already tight energy supply and demand relationship is even worse

International oil prices rose sharply in response

February 24, 11:21 a.
m.
Beijing time

Brent crude futures broke above $100 a barrel intraday

The highest since September 2014

Since then, it has continued to oscillate to the upside

As of 21:00 Beijing time

It is $104.
77/barrel

According to the official website of the Intercontinental Exchange, Brent's intraday high reached $105.
72 per barrel

The escalation of the situation in Russia and Ukraine has pushed oil prices soaring

Russia and Ukraine play an important
role in the European and even global energy markets.

Russia is the world's second largest oil producer
.
In December 2021, Russia produced 11.
19 million b/d, second only to the United States' 11.
58 million b/d
.

Russia is Europe's main source of oil and gas imports
.
About 30% of European crude oil imports come from Russia
.
Among them, refinery crude oil imports from Germany, the Netherlands and Poland account for 48% of Russia's total crude oil exports, and countries such as Estonia, Poland, Slovakia and Finland are more dependent on Russian energy
.

And Ukraine is an important energy channel
for Europe.
Data shows that in 2021, 11.
9 million tons of Russian crude oil were exported to the EU through Ukraine.

If Russian crude oil exports are blocked, the global oil supply and demand will be out of balance
.
Therefore, every move of the situation on the Russian-Ukrainian border naturally affects the nerves
of the crude oil market.

On the 24th local time, Putin said in an emergency live TV speech on the situation in Ukraine that he had decided to conduct a special military operation
in the Donbas region.
The situation subsequently escalated
further.
There is information that Russian troops have landed in Odessa, Ukraine, and have broken through the border
of the Kharkiv region.
According to CCTV news at 16 o'clock on February 24, Ukrainian officials said that a total of 7 people have died from artillery fire and 9 others have been injured
.

The escalation of the situation in Russia and Ukraine, and the intensification of market concerns about the interruption of Russian oil and gas supplies, have prompted a sharp rise in international oil prices
.

There have been four oil crises in the world, each of which has the shadow of war, which has caused the price of oil to rise sharply, thus having a major impact
on the world economy.
For example, in 1973, when the first oil crisis broke out, the price of crude oil rose from less than $3 per barrel to more than $13, which had a great impact on the United States and a few other countries that started with cheap oil, deepening the world economic crisis
.

Whether this round of oil price increases can evolve into a new oil crisis depends on the next changes
in the situation in Russia and Ukraine.

In response to the surge in oil prices caused by the tension between Russia and Ukraine and its impact on inflation, the United States is also stepping up its search for solutions
.
According to Bloomberg, the Biden administration is considering another use of emergency supplies to release the Strategic Petroleum Reserve
.

In addition, the results of Iran's nuclear negotiations have also become one of the hopes to ease the crude oil market, and it is reported that once the United States lifts the "gate" of sanctions, Iran has the ability to resume the supply of additional crude oil to the international market by 1.
5 million ~ 2 million barrels / day
in a short period of time.

Edward Moya, senior market analyst at investment bank Oanda, told reporters, "Oil inventories are low everywhere today, and even if the Iran nuclear deal is restarted, it will take several months to increase production, so the oil market (the current situation) may continue into the summer
.
" But if the Iran nuclear talks are resolved quickly, the spike in oil prices could be limited
.
”

After oil prices exceed $100/barrel, what are the variables?

What do industry experts think of Brent oil prices breaking through the $100/barrel mark? Where are oil prices headed?

Dong Xiucheng, a professor at the National Institute of Opening Up to the Outside World of the University of International Business and Economics, said that Russia is a very important oil and gas resource country, and the military conflict between Russia and Ukraine is a major geopolitical event, and the impact on oil prices is of course very positive, and the rise in oil prices is expected
.
The market will consider whether the situation in Russia and Ukraine will further escalate in the next step, and the most worried is the interruption of oil and gas supplies from Russia, once interrupted, the price of oil and gas prices will be unimaginable
.
The subsequent trend of oil prices depends on the extent of the conflict, the United States said that it will not send troops to Ukraine, and how the scope of the battlefield changes needs to be further observed
.
Whether it is a big fight or a small fight, the tension should last for a long time, once there are new changes will also affect oil prices, the oil price trend will be very difficult in the coming period, violent shocks are inevitable
.

Cheng Chunhua, associate professor at Minzu University of China, said that the direct reason for the soaring oil price above $100 per barrel was geopolitics
.
The situation between Russia and Ukraine is tense, and a military conflict
broke out.
It is difficult for Europe and the United States to change the oil and gas market situation
where supply exceeds demand.
There are also systemic reasons
for the surge in oil prices.
Oil demand continued to recover, Omicron impact was less than expected, and the collapse in demand in 2020 led to problems in the oil and gas supply chain, industrial chain and investment, which were difficult to solve
in the short term.
In addition, oil companies are tilting
their investments towards new energy sources.
The role of new energy is exaggerated, and the current safety is insufficient and unstable
due to climate influence.
Ultimately, fossil fuels are in short supply, which is a short- to medium-term megatrend
.
At present, the remaining oil production capacity is basically exhausted, the inventory is also very tight, the measures of Europe and the United States to deal with high oil prices are basically exhausted, and the situation of short supply and demand is difficult to change
in the short term.
Oil prices are likely to continue to rise to very high levels
.

Huo Lijun, an economist at the Petroleum Market Research Institute of the China Petroleum Economic and Technical Research Institute, said that after the situation between Russia and Ukraine continued to be tense, geopolitical risks supported oil prices to reach a new high
after Russia announced military action.
The situation in Russia and Ukraine will aggravate the shock of oil prices, and it is difficult to improve the short-term situation, and oil prices should remain high
.
Supply and demand fundamentals and geopolitical tensions support oil prices, which will continue to climb
if the situation between Russia and Ukraine escalates further, especially if Europe and the United States increase sanctions against Russia and sanction its oil and gas exports.

It is not only oil prices that "go berser", but also gas prices .
.
.

More than 40% of Europe's natural gas comes from Russia, and about 1/3 of Russian gas flowing to Europe passes through Ukraine
.

The situation in Russia and Ukraine also affects the natural gas market
.

Ahead of Russia's military action, European gas prices have also risen
significantly recently, fearing that the situation in Ukraine could threaten Russian gas supplies to Europe.
On the 23rd, the Dutch TTF natural gas spot price rose by about 10%.

Affected by the Russian-Ukrainian conflict on the 24th, European natural gas prices soared
.
Zhitong Finance reported at 16 o'clock that the price of TTF natural gas futures in the Netherlands rose for the fourth consecutive trading day, rising more than 22% to 109.
08 euros / MWh, and the intraday increase once reached 41%.

According to CCTV news, on February 22, local time, German Chancellor Scholz announced that in the context of the escalation of the Russian-Ukrainian conflict, the German government will temporarily suspend the approval process
of the "Nord Stream-2" natural gas pipeline.
This will put Europe, already in the midst of an energy crisis, at greater risk
in terms of energy supply.

Goldman Sachs analysts believe that if tensions escalate further, affecting gas supplies, in which case European gas prices may briefly return to the highs of mid-December last year, or even reach higher levels
.

Kateryna Filippenko, chief analyst at European Gas Research at Wood Mackenzie, said: "Gas stocks cannot be rebuilt
throughout the summer of this year if supply is disrupted for a long time.
This winter may face a catastrophic situation in which natural gas stocks are close to zero, and natural gas prices will be ridiculously
high.
Factories will close, inflation will spiral, and the European energy crisis is likely to trigger a global recession
.
”