International oil prices rushed to the $100/barrel mark

The situation in Ukraine continues to ferment, stimulating the rise in international oil prices
.
On February 28, Brent oil prices fluctuated intraday, rushing to $101.
5 / barrel as of 16:00 Beijing time, firmly above
$100 / barrel.
In the week of February 25, oil prices reacted strongly to the escalation of the situation in Ukraine, showing an upward trend, and Brent oil prices rose by 4.
7%.

Russia and Ukraine play an important
role in the European and global energy markets.
Data shows that in 2021, Russian oil production reached 10.
9 million barrels per day, accounting for 11% of global production; Russia accounts for 12% and 21%
of total global oil and gas exports.
About 30% of European crude oil imports come from Russia, while natural gas from Russia accounts for more than 40% of European consumption, about a third of which passes through Ukraine
.

Currently, the oil market is very sensitive
to geopolitical shocks due to the fundamentals of short supply.
Brent oil prices soared to $105.
72 a barrel on the same day after Russia announced a special military operation in the Donbas region on February 24, with concerns about the disruption of oil and gas supplies from Russia intensifying, the highest
since September 2014.
The price of the three major international natural gas markets also rose, and the European market reacted particularly strongly, and the price of TTF natural gas futures in the Netherlands soared 51% on the 24th to 134.
316 euros / MWh, a new high
in nearly two months.

Can international oil prices continue to rise in the future? Dong Xiucheng, a professor at the National Institute of Opening Up to the Outside World at the University of International Business and Economics, said that the market will consider whether the situation in Russia and Ukraine will further escalate, and the most worrying thing is the interruption of oil and gas supply from Russia, once interrupted, the rise in oil and gas prices will be unimaginable
.
The subsequent trend of oil prices depends on the extent of the conflict and the scope of
the battlefield.
Sharp oil price shocks are inevitable
in the coming period.

In the view of Cheng Chunhua, associate professor of Minzu University of China, at present, the global oil surplus capacity is basically exhausted, inventories are 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 is difficult to change in the short term, superimposed on geopolitical factors, oil prices may continue to rise to a very high level
.

Huo Lijun, an economist at the Petroleum Market Research Institute of the China Petroleum Research Institute of Economics and Technology, believes that the situation in Russia and Ukraine is difficult to improve in the short term, and oil prices will remain high
.
If the situation between Russia and Ukraine further escalates, especially if Europe and the United States sanction Russian oil and gas exports, oil prices will continue to climb
.

In fact, the market is worried about the inclusion of Russian oil and gas in the scope of sanctions by Europe and the United States
.
The United States announced on February 26 that the leaders of the United States, the European Commission, France, Germany, Italy, the United Kingdom and Canada decided to exclude some Russian banks from
the Society for Worldwide Interbank Financial Communications (SWIFT) payment system.
Lin Boqiang, director of the China Energy Policy Research Institute at Xiamen University, told Shell Finance that after some Russian banks were kicked out of the SWIFT system, oil and gas prices are expected to rise, which in turn will have a great impact
on inflation and the economy.
The Wall Street Journal quoted a senior U.
S.
government official as saying, "This sanction will leave room for interbank payments related to Russian oil and gas.
"

Compared with predicting the trend of oil prices, it may be more important and urgent
to deal with the adverse impact of high oil prices on the economy and society.
Research models suggest that a $100/barrel oil price would raise inflation in the United States and Europe by about 0.
5 percentage points
.
The U.
S.
Labor Department's consumer price index (CPI) rose to a 40-year high in January, and U.
S.
consumers' inflation expectations for the coming year nearly doubled to 4.
8%, compared to 2.
6%
in the same period in 2021.
Rising oil prices have raised expectations that the Fed will accelerate the pace of interest rate hikes
.

In response to the current rise in oil prices and the impact on inflation, the United States is also stepping up its search for solutions
.
White House press secretary Jen Psaki said on February 23 that if oil prices rise further due to the situation in Russia and Ukraine, the United States will consider releasing strategic crude oil reserves
again.
However, industry insiders pointed out that based on previous experience, the means of releasing strategic crude oil reserves have little effect, and it is difficult to fundamentally reverse the trend of
oil prices.

In addition, the outcome of the Iranian nuclear negotiations may be a glimmer of hope
for easing tensions in the oil market.
Once the U.
S.
-Iran reach an agreement, the return of Iranian crude to the market is expected to bring an increase
of 1 million to 1.
5 million barrels per day.
At present, the Iranian nuclear negotiations are entering a critical period, and international tensions may increase the motivation of the United States to promote the Iranian nuclear agreement
.

On the whole, the tight supply situation in the oil market, mainly caused by insufficient investment, is difficult to change in the short term, and the fundamentals will support oil prices to remain high for a long time, while geopolitical factors such as the evolution of the situation in Ukraine and the progress of the Iranian nuclear negotiations will aggravate oil price fluctuations, and the international oil market is expected to continue the price trend
of high and wide volatility.