On the 24th, the situation in Ukraine escalated sharply again, causing oil and gas prices to jump.

The Russian Ministry of Defense stated that all tasks of the armed forces of the Russian Federation have been completed on the 24th, and 83 of Ukraine's ground military infrastructure were paralyzed under the attack.

The Chernobyl nuclear power plant is under Russian control.

Leaders of the Group of Seven (G7) nations agreed to push ahead with "devastating" sanctions against Russia and "aggressively enforce them", without considering removing Russia from SWIFT for the time being.

Biden announced the breakup of U.S.-Russian relations, and the Pentagon ordered about 7,000 more troops to be sent to Europe.

  Oil and gas prices jumped as Russia is the world's third-largest crude oil producer and Europe's most important supplier of natural gas.

Brent crude futures topped $100 a barrel in early trade on Thursday, the highest level since 2014.

European gas prices also surged as much as 41% at one point.

  Analysts see little way for the world to lower oil and gas prices in the wake of the escalation in Ukraine as crude and natural gas producers are limited in their ability to boost output.

Global inflationary pressures will also intensify as a result, and global central bank monetary policies will face more uncertainty.

Oil prices may climb to $125 a barrel in the second quarter of this year

  Markets expect global oil demand to return to pre-coronavirus levels of around 100 million barrels per day in 2022.

But even before the escalation in Ukraine, oil supplies were struggling to keep up.

  Global spare capacity, or extra production that can come online in a few weeks, has fallen to 2.8 million barrels per day (bpd), according to an analysis by Christyan Malek, head of global energy strategy at JPMorgan Chase & Co. Political issues, the average buffer for global spare capacity is 5 million bpd.

Therefore, even if the Ukraine crisis does not affect Russia's oil exports, international oil prices will climb further.

  "Spare capacity is falling, and the (oil) market has to re-price this lack of a margin of safety." Molek expects Brent crude futures to rise to $125 a barrel in the second quarter of this year.

"Oil prices are rising, an oil supercycle is inevitable, and the market can't do anything about it," he added.

  Bob McNally, head of Rapidan Energy Group, believes that the risk of oil supply disruptions may be limited to oil and gas passing through Ukraine.

Specifically, Ukraine's crude oil production is about 250,000 barrels per day, and its natural gas supply accounts for about 20% of Russia's gas delivery to Europe.

  "But given the lack of spare capacity in the oil and gas market, it doesn't matter whether there is a real supply disruption," he told an oil market discussion this week. The pressure to continue rising will always be there."

  Some members of the Organization of the Petroleum Exporting Countries (OPEC) have so far struggled to restore pre-pandemic production capacity due to reduced investment in oil production due to spending cuts during the pandemic.

In fact, OPEC and oil producers including Russia have missed output targets since July last year.

The United States has also repeatedly urged OPEC, especially Saudi Arabia, to ramp up oil production to ease oil prices and curb inflation.

The latest U.S. sanctions also do not include restrictions on Russian crude supplies.

  OPEC+ will meet on March 2 to decide on production for April.

But as of Wednesday, representatives of some major member countries still said that triple-digit oil prices would not prompt them to increase production any faster.

Their current strategy is to add 400,000 bpd of supply to the market each month.

  "Even if Saudi Arabia agrees to increase production, it is unclear whether the proposed action will be effective, as the increase will only further consume spare capacity," McNally said.

  In addition to urging OPEC to increase production, the United States and some other major global oil consumers have also released emergency oil inventories since last year to stabilize prices.

Yesterday, US President Biden also said that he is working with major consuming countries to release crude oil from the Strategic Petroleum Reserve.

To this end, at the end of the New York market on Thursday, oil prices pared their previous gains, WTI crude oil futures closed below $93 a barrel, and Brent crude oil also fell below $100.

  But while futures pared gains after Biden's speech on Thursday, the potential for a sharp rise in oil prices remains, said Ed Moya, senior market analyst at Oanda in the Americas.

The fall in crude oil prices after the announcement of this round of sanctions did not change the possibility of a sharp rise in oil prices.

  John Driscoll, chief strategist at energy services firm JTD Energy Services, also said that there is already a lot of bullish sentiment in the oil market fundamentals, and the escalation of geopolitical risks over the past few days has materially further exacerbated the commodity market. Risk of imbalance.

At this stage of the conflict, it is difficult to see an easy way to de-escalate the situation.

Coupled with optimistic news about the progress of Iran's nuclear negotiations may have been priced in the current price, oil prices may continue to fluctuate upward.

Natural gas prices will also continue to rise

  Not only oil, but the escalating situation in Ukraine caused the TTF benchmark Dutch gas futures price to jump to over 88 euros/MWh at one point, given that Europe relies on Russia for 40% of its gas supply.

Wholesale gas prices in Europe have surged more than 450% over the past year as demand for gas recovers and imports from Russia dwindle.

  Earlier, Germany and the United States suspended approvals for the Nord Stream 2 pipeline as part of the sanctions, potentially delaying the pipeline's commissioning until 2023.

Analysts' baseline judgment is that Russia will not cut off gas supplies to Europe, but may retaliate with a reduction in gas supplies, and in any case, gas prices are hard to avoid risk premiums around supply disruptions.

  IHS Markit analyst Laurent Ruseckas said Moscow was unlikely to respond to Western sanctions by cutting off supplies of natural gas, which reaches Europe through pipelines from Ukraine, Poland and the Baltic.

"Unless there is sabotage by Russia or Ukraine, the likelihood of supply disruptions from 'stray bullets' is low, which is certainly not the baseline case for our judgment."

Russian Energy Minister Nikolai Shulginov also said at an energy conference in Qatar on Tuesday that Russia's goal was to keep gas supplies "undisturbed".

  But ING analyst Warren Patterson said, "Theoretically, this should not have any impact on gas supplies to Europe because the pipeline is not yet operational and there are other routes through which Backup pipeline capacity to supply natural gas. However, Russia may further reduce the total gas delivery to Europe in retaliation for the suspension of the approval process in Europe and the United States.”

  At the aforementioned energy conference, Qatar's Energy Minister Saad al-Kaabi pointed out that in the event of an extreme case of Russia's interruption of gas supplies, Europe will find that no country can replace Russia in supplying Europe's gas supply, Because "as with oil, there is not enough spare capacity in the market to fill the gap".

  JPMorgan's commodity strategy team, led by Natasha Kaneva, also said in a research note that natural gas "is not immune to the risk premium brought about by supply disruptions, which may be reflected again in this geopolitical crisis." The team noted that the likelihood that Nord Stream 2 will also not be operational in 2023 is increasing, according to EU and US statements, "If this is the case, we expect the European gas market to be in a state of long-term competition with LNG, and ultimately It shows up as prices continue to rise.”

Global inflation pressures are difficult to solve, and central banks are even more difficult

  With oil and gas prices continuing to rise, many analysts have begun to worry about the risk of further inflation.

  The U.S. and Europe are almost certain to impose a far-reaching package of sanctions against Russia that could, in the worst case, exclude Russia from the SWIFT financial information system, analysts at Eurasia Group said in a report. Put the Nord Stream 2 pipeline on indefinite hold.

Oil and gas prices will rise sharply, adding to global inflationary pressures and dragging down financial markets and global growth.

  According to Bloomberg's previous calculations, when the international oil price climbs to $100 a barrel, the inflation rate in the United States and Europe will increase by about 0.5 percentage points in the second half of the year.

JPMorgan's forecast believes that if international oil prices climb to $150 per barrel, the global inflation rate will soar above 7%, and the global economic expansion will be completely stalled.

  And for some time, global central banks, including the Federal Reserve, have made fighting inflation their primary policy objective.

The dual risks of rising inflation and an uncertain economic outlook accompanying the escalation of the situation in Ukraine will undoubtedly bring greater uncertainty to the formulation of global central bank monetary policy.

  The European Central Bank's hawkish senior official and management committee member Holzmann (Robert Holzmann) has said that the Ukraine conflict may delay the European Central Bank's plan to withdraw from stimulus policies, and the uncertainty related to the Ukraine conflict has increased. The European Central Bank will carefully analyze the possible consequences of the crisis. Economic impact.

“It is clear that we are moving towards normalizing monetary policy, although there may be some delays at the pace now,” he said.

  The Fed's firm stance on tightening monetary policy has not been affected for the time being, but it also said it is closely monitoring the development of the situation in Ukraine.

Richmond Fed President Barkin said he will have to see if the situation in Ukraine upends the Fed's stance on monetary policy.

Atlanta Fed President Postik also said that the Fed is closely tracking the Ukraine crisis to assess the possible economic impact of the situation.

But he also noted that Fed monetary policy is destined to return to a more normal state.

Cleveland Fed President Mester said geopolitical risks will add to inflation and growth risks to the U.S. in the short term, although it would still be appropriate for the U.S. central bank to raise interest rates in March and then start a series of rate hikes.

  Jim Paulsen, chief investment strategist at Leuthold Group, an independent US investment and research firm, believes that geopolitical events may not interfere too much with the Fed's thinking, and the path of interest rate hikes is still expected to follow the set path.

Chua Hak Bin, a senior economist at Maybank in Singapore, said higher oil prices would increase pressure on central banks around the world, prompting them to tighten the cycle earlier and raise interest rates more aggressively to curb inflation.

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