Don’t forget the risk of sudden drop in oil prices, say analysts

The US on Tuesday imposed sanctions on Russian oil imports, while the United Kingdom said it would end them and Shell said it would stop buying Russian crude. Norbert Rucker, Julius Baer’s head of economics and next generation research, explained how he doesn’t see the ban as a gamechanger.

“The US and UK sanctions on Russian oil are not a fundamental game changer. The world is not about to run out of oil. We are looking at a price crisis rather than a supply crisis. Beyond the near-term uncertainty, we have confidence that oil The price rise of the US more or less follows a known pattern. Such a sharp move usually follows a downward move within weeks and months, not years,” the note said.

The conflict has rocked commodity markets and jolted the global economy, as countries emerge from the COVID pandemic. Russian oil is being abandoned, banks are predicting even higher crude prices and already tight energy markets are being stretched.

Russia’s isolation leaves a gap on the oil market. The liquidity of the situation and the uncertainty of how the supply chain will adjust creates extreme panic in oil markets and fuels a rise in oil prices.

“Since yesterday, both the US and the UK have imposed direct sanctions on Russian oil and gas imports, even after they announced a ban. Basically, it is not a game changer. The US has been a minor buyer of so-called unprocessed oils, which it can easily Similarly, the UK ban will only go into effect later this year, which gives the market enough time to adjust to supply, which by then will look very different either way.”