The price of a barrel of oil exceeded 100 dollars on Thursday for the first time in more than seven years. Brent oil from the North Sea in its May contract is agreed at US$101.84 with a jump of almost 9%, while West Texas Intermediate (WTI) crude oil, which operates in the New York futures market in its April contract is above $100 a barrel, up 8%. Brent oil after the escalation of the conflict reached US$103, its highest level since August 2014.
Since the tension between the two countries began, the cost of a barrel has increased by 25%. Keep in mind that Russia is the second largest oil exporter in the world and this may threaten the global recovery.
The level of harshness of the new economic sanctions that are being prepared to economically drown the Kremlin will be key to calibrating how far the rise in prices of energy raw materials can go. Although Vladimir Putin promised not to turn off the gas or oil tap – a decision that could change from one day to the next – his credibility is at a minimum after the attack on Russia.
Gas
Even more relevant is the rise in gas, with which Russia covers approximately 25% of the EU’s consumption, a share that in the case of oil exceeds 40%. The reference of the Dutch market TTF was already shooting up about 33% compared to the close of Wednesday and exceeded 118 euros per megawatt hour (MWh), after reaching the barrier of 120 euros/MWh in the first minutes of trading .
It is a level that gas has not reached since the eve of last Christmas. In just three days, and since Russia recognized the independence of the Ukrainian provinces of Donetsk and Lugansk, the TTF has become more than 60% more expensive. The Russian attack on Ukraine comes after Germany has decided to indefinitely suspend the license for the Nord Stream 2 pipeline and comes at a time when Europe’s gas reserves are at a historically low level of just over 30%.
The exponential rise in gas in the last year is, together with the increase in CO2 emission rights, the main reason for the record prices of electricity in recent months. Each euro of rise in the price of this raw material is equivalent to about two euros of increase in the price of the wholesale electricity market.
metals
The price of gold, the quintessential asset-backed option, soared 6% this month to above $1,907 an ounce. After learning of the Russian offensive, gold is trading at highs and shoots up 3%, operating at US$1,969.90, triggering a strong stampede in equities and taking refuge in metals. If tensions continue to rise, analysts believe the price of the metal is likely to approach record highs when it hit $2,055.70 on fears of the coronavirus pandemic.
#Obviously there is a demand for a safe haven in the price (of gold), but this crisis is very inflationary because it is adding upward pressure to the prices of raw materials (…) it is also recessive in terms of the growth outlook” Saxo Bank analyst Ole Hansen said.Gold is up more than 9% so far in February as the crisis between Russia and Ukraine hit appetite for risky assets.The metal is headed for its best monthly performance since July 2020.
Next, another of the metals that rises this morning is silver (+4%), whose price now exceeds US$25 per ounce, leaving behind the psychological level of US$23.80 and which it could not break in previous weeks. Therefore, the flight of investors to the metal could trigger the approach to 30 dollars, a level that it has not visited since last May 2021.
On the other hand, Palladium (+9%) is another of the metals that is rebounding strongly, trading at a maximum of US$2,667.00 and practically approaching the levels of August 2021, so we do not rule out a testing of $2,800, July highs. “The advance of palladium is a natural reaction, because Russia is a large supplier of the metal. For analysts, the only thing that could counteract it is the risk of a recession, especially in Europe and Germany, which is a large producer of automobiles. .
Russia is the world’s third largest gold producer, while Moscow-based Nornickel is also a major producer of palladium and platinum. Among other precious metals, silver gained 4.2% to $25.56 an ounce and platinum added 2.7% to $1,121.10.
asian bags
The main iHong Kong, Mainland China, and Taiwan Stock Market Indices collapsed after Russian President Vladimir Putin ordered a military operation in Ukraine.
ANDThe benchmark indicator of the Hong Kong Stock Exchange, the Hang Seng, fell 3% The index that measures the evolution of the values of mainland China listed on the Hong Kong stock market, the Hang Seng China Enterprises, reached 4.14%. For its part, the two main places in mainland China, those of Shanghai and Shenzhen, fell by up to 2%.
russian bag
The Moscow Stock Exchange Index falls more than 50% this Thursday and the Russian currency, the ruble, reached its historical low against the dollar after the launch of a Russian military offensive against Ukraine.
The start of the military operation was followed by the suspension of the listing on the Moscow Stock Exchange and the St. Petersburg Stock Exchange due to strong volatility in the markets. At 10:00 Moscow time, trading on the Moscow Stock Exchange was reopened. Losses reached up to 50%.
The currency and bonds also sank, prompting the central bank to announce its first currency intervention designed to prop up financial stability since 2014, when Russia annexed Crimea from Ukraine. “In the next few days, the Russian market will be extremely volatile. Given the high risks of tightening sanctions against Russia, we are revising our target benchmarks for Russian stocks,” Evgeny Loktyukhov, Head of Economic and Industrial Analysis at PSB, told Russian media. Quote.
”There has never been such a significant drop in the recent history of the Russian stock market. The main reason for what is happening is the flight from risks amid the escalating geopolitical aspect,” added Vladislav Silaev, senior trader at Alfa Capital. In his opinion, until diplomats and politicians sit down at the negotiating table, the market will remain in the red.
The ruble slipped to a record low of $89.60 against the dollar and approached a crucial threshold of 100 against the euro. It was around 70 to the dollar and 81 to the euro before the recent round of geopolitical tensions between Moscow and the West began to escalate in October.
“In order to stabilize the situation in the financial market, the Bank of Russia decided to start interventions in the foreign exchange market,” the bank said on Thursday. The move helped the ruble slightly trim losses.
The Moscow and St. Petersburg Stock Exchanges were forced to halt trading after their main indices plunged above 30%. “Trading in all markets was suspended. The restart will be announced at a later date,” the Moscow Stock Exchange said in a statement, reports Efe. The St. Petersburg Stock Exchange, the second in the country, also announced a “ban on offers and contracts for all modes of trading and all types of securities.
european bags
The main markets in Europe opened with massive sales by investors. Frankfurt lost 4.9%; Milan, 4.3%; Paris, 4%, and London, 2.7%. The Euro Stoxx 50 also started with red numbers above 3.5%. The Ibex fell to close to 8,000 points. The fall is far from the 14.06% of March 12, 2020, when the markets panicked due to the pandemic and the massive confinements that were being decreed in half the world. Even so, the tensions unleashed by Putin with the main Western powers, including the US and the EU, have dealt a blow to markets that had been entering negative territory for weeks.
“Emerging market equities could fall by up to 10% in the short term, unless it can be offset by a mediating policy response, mainly due to investor confidence and growth prospects,” said Leonardo Pellandini, Julius Baer analyst.
Source: Ambito
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