2022 has passed but much of the madness it brought remains with us as we begin 2023….ICE Brent prices fluctuated between $65 a barrel as the low point and $136 as the high point before and after the first war in Europe since 1945 (with ever-echoing threats of a nuclear conflict) began in February when Vladimir Putin decided Russia should show it’s might to the World and take back lands which according to him should fly the Russian flag by invading Ukraine….the first on his list.
A three-week “special military operation” has dragged on for 10 months, remains ongoing and deadlocked as Putin’s arrogance underestimated Ukrainian resistance (bravely led by President Zelensky) and the quality of his own forces to conquer a country of 42 million people who bravely rejected and fought off many of the hostile approaches made by his ultimately flagging armies.
Europe joined hands in rejecting his actions, thus binding Putin’s country into unending EU sanctions (primarily banning Russian oil imports) and making things worse for Russia by supplying Ukraine with weapons and military aid to defend itself against the mighty bear. Moscow’s glamorous side was ostracised and had to endure the ignominy left by the departure of major global brands amidst a level of madness which defies understanding.
So far Russia’s mission has faltered but underestimating Putin’s determination to win this war and look further afield for more conquests is a thought which should be quickly dismissed….. he is unlikely to stop anytime soon!
This aggressive and unpredictable behaviour appears to be the new norm, and high levels of displacement and disruption caused by such action are something the global population will sadly have to get used to. Energy shortages brought about by this needless war turned to panic as 2022 moved along… particularly for industrial end users and household consumers as prices went through the roof…… and consumers struggled to pay the stratospheric prices created by a change in supply seldom seen…. Their concerns were not just in the present but in fear of an unknown future as EU sanctions bite and Russia cuts supply in retaliation.
In the autumn the 23 country members of the EU declared that Russian crude oil could not be bought, insured or shipped at a greater price than $60 per barrel (fob)…. Vladimir Putin responded by declaring that any country or company applying the cap price will be dropped from Russia’s supply portfolio. This leaves India and Asia as Putin’s destinations of choice (with few other options) the spin-off from that is a declaration by the unholy alliance of Russia, Iran and China (Belarus and North Korea are also on the team) to support each other…. In theory against apparent “Western aggression”. Putin seems proud of these newly formed “friendships” but has surely missed a trick given Iran and Russia have some of the largest oil reserves in the World….. and both need to sell their crude oil in Asia (because of Western sanctions) which is not a bottomless pit of oil demand….that friendship may not last long!! It should be noted that whilst Russia hasn’t consulted fellow OPEC+ producers over its response to the price cap, Moscow and the other group members are in contact on other issues, Kremlin spokesman Dmitry Peskov said on Wednesday.
Furthermore, Moscow claims the price cap will not seriously hit its oil production and economy. Russia’s oil production will not fall off a cliff now that the EU-G7 price cap on Russian crude has come into effect, Russia’s First Deputy Energy Minister Pavel Sorokin said earlier this month. As if all this madness was not enough for oil traders to deal with the silent travelling death known as covid returned in a big way in China. The apparent and eventual solution at the end of the year according to President Xi was to unlock the Chinese population and let them freely mix, their only task being to buckle down to work in order to save Chinese industry and China’s slowing economy …… Covid cases have skyrocketed during the last few days and this looks far too close to what happened in December 2019 for comfort.
America joined the proceedings…supporting Ukraine valiantly with the necessary hardware to defend themselves thus enabling them to inspect Russian weaponry and take a sideswipe at Russia whilst doing it…but at home, the economy shook…violently at times…the cavalry came over the hill in the form of the American Federal Reserve Bank, who relentlessly guessed week in week out how the U.S. economy was fairing, their only solution being to pull the trigger from the hip, which sent interest rates higher and higher as the year progressed and created many wobbles in oil prices.
Other news bombs hit the markets too in 2022….the world finally met Elon Musk, a genius comparable to Einstein according to his mother…a man who was only the second ever to create a wealth of 200 billion dollars for himself….and the first to lose $200 billion dollars too….
The U.K. lost Queen Elizabeth the second after 70 years on the throne, gained more strikers and disputes than when Margaret Thatcher ruled the roost and successfully achieved the impressive statistic of having three different Prime Ministers in one year!
Somehow oil markets survived all of this!
When ICE Brent hit $136.00 a barrel and petroleum products readily breached three figures per tonne it seemed prices could go to levels never seen before….. some “experts” predicted $200+ a barrel crude oil ….that didn’t happen… $76 a barrel did… thus confounding their not so brilliant forecasts cast out monthly by Goldman Sachs, Morgan Stanley, Citibank, Bank of America to name but a few who tried to tell us what we could expect next. Goldman appears to be releasing 4000 of its workforce in 2023… enough said. It is hard to get away from the fact that time and again the so-called experts are lost and way off the pulse with their price predictions leaving their Wall Street followers confounded, covered in red ink and beaten…..although it was an entirely different story for those companies who had physical oil supply in the right place at the right time ….their cargoes (the alternative to Russian origin oil shipments) commanded super high premiums over traditional pricing indexes, which consumers didn’t hesitate to pay as they feared a lack of oil supply for their end users, consumers and their very survival.
2023 has already heard its first threat from Vladimir Putin … in his 9-minute new year’s address he urged all Russians to support his “special military operation” …. (War as we call it)….claiming ultimately Russia will defeat Ukraine despite the West’s blatant attempts to threaten Russia’s very existence (his words, not mine!) and indirectly weaken him and his people by supplying military hardware and weapons support for Ukraine. So much for his remarks regarding peace talks this week!
Happy New Year!!