Brent soars above $100/b after Russian attack on Ukraine

The price of a barrel of Brent crude oil has risen sharply to almost $104/b but seems to be levelling off at the time of writing, after Vladimir Putin launched a major offensive against Ukraine (more details in the Daily Eco).

In fact, it is all the commodity prices of which Russia or Ukraine are major exporters that are soaring (gas of course, but also copper, palladium, platinum, wheat… not to mention gold, which plays its role as a safe haven). The key question is whether Western governments will hit Russia where it hurts but with even greater damage to themselves: hydrocarbon exports. There is much talk of banning Russia’s access to the Swift payment system, but this would affect Russian oil or gas purchases, unless an exemption is granted in this particular area.

OPEC, led by Saudi Arabia, a traditional US ally, is due to decide next week whether to continue its strategy of gradually increasing production by 400kb/d… in cooperation with Russia. The Russian offensive in Ukraine also brings a new element of uncertainty. The Iranian nuclear negotiations (in which Russia is a stakeholder) have curiously seemed to escape the turmoil for the moment. The return of Iranian oil to the market seems to be on track, but in the current context, the impact of this news would be limited, as we explained here.

The US inventory report is also expected to take a back seat this week, with the market expecting crude stocks to be flat, while the API estimate is for a 6mb!