Oil prices soar 10% and stocks plunge as US and
Europe consider ban on Russian crude
Brent crude jumped $20 to $139.13 at start of trading
on Monday, with analysts predicting further increases
Oil prices have jumped more than 10% and are nearing
record highs as US and Europe consider ban on Russian crude.
Martin
Farrer
Mon 7 Mar
2022 03.47 GMT
Oil prices
have soared more than 10% and are closing in on their all-time high levels
after the risk of a US and European ban on Russian crude threatened a
stagflationary shock for world markets.
The global
benchmark of Brent crude hit US$139.13 a barrel at the start of trading on
Monday, a leap of more than $20 on Friday’s close of $118.03.
The
all-time of $147.50 was reached in July 2008 but some analysts think that mark
could be surpassed because of the geopolitical impact of the Ukraine crisis.
Stock
markets headed the opposite way with more big losses when trading began on
Monday. The Nikkei in Tokyo was down more than 3%, as was the Hang Seng in Hong
Kong. In futures trade, the FTSE100 off 2.6% and the S&P500 down 1.3%.
The panic
on trading floors sent safe havens sharply higher, with gold hitting as much as
$2,000.86, its highest since mid-2020.
Although
the oil price slipped back to $130 after the initial surge, consumers still
face higher household energy and petrol costs, while inflation will rise across
the board if businesses are forced to pass on higher fuel expenses.
The price
of natural gas is closely linked to crude oil and is sure to lift again. Gas
prices set a new record high mark on Friday in the UK, for example, when
national balancing point (NBP) benchmark soared above 500p a therm.
Having
climbed 21% last week, Brent crude was further energised by the risk of a ban
of Russian oil by the US and Europe.
Mohamed
El-Erian, cheif economist at the insurer Allianz, said that it appeared likely
that the new sanctions would be imposed given the contin ued bombardment of
Ukrainian cities.
“It’s hard
to see such sanctions not being imposed given the atrocities being committed
against Ukraine,” he said on Twitter.
Bank of
America chief economist Ethan Harris said cutting off most of Russia’s energy
exports would be a “major shock to global markets”, adding that the loss of
Russia’s 5m barrels could see oil prices double to $200 a barrel.
Mike
Muller, of commodity trading firm Vitol, also said prices could rise further.
“I don’t think we’ve priced in everything yet,” he said.
Commodity
prices in general are having their strongest start to any year since 1915, Bank
of America said. Among the many movers last week, nickel rose 19%, aluminium
15%, zinc 12%, and copper 8%, while wheat futures surged 60% and corn 15%.
That will
only add to the global inflationary pulse with US consumer price data this week
expected to show annual growth at a stratospheric 7.9%, and the core measure at
6.4%.
It leaves a
tough decision for the European Central Bank when it meets this week against a
backdrop of a sharply falling euro.
The
nightmare scenario of stagflation – where inflation combines with stagnating
growth – looms for the world economy.
“Given the
potential for stagflation is very real, the ECB is likely to maintain maximum
flexibility with its [quantitative easing] programme at €20bn through the
second quarter and potentially beyond, thus effectively pushing out the timing
of rate hikes,” said Tapas Strickland, an economist at NAB.
“Higher
inflation forecasts, though, mean rate hikes will be needed on the horizon.”
With the
outlook for European growth darkening, the single currency took a beating and
fell 3% last week to its lowest since mid-2020. It was last down 0.6% at
$1.0864 and risked testing its 2020 trough of about $1.0635. It has also lost a
lot of ground against the pound, which now buys €1.214.
The dollar
was broadly firmer, supported in part by a strong payrolls report which only
reaffirmed market expectations for a rate hike from the Federal Reserve this
month. The dollar index was last at 98.812 having climbed 2.3% last week.
Gold
benefited from its status as one of the oldest of safe harbours and was last up
0.7% at $1,983 an ounce.
Sem comentários:
Enviar um comentário