To The Moon

Energy price has been stongly connect to the Ukrainian-Russian War, while there are more other issues like supply, demind, policy involved also. In a word, the prices of crude oil and natural gas experienced great shocks in Q1 of 2022.​​

​​

Let's roughly sort out which forces are related to energy prices:

First of all, in the United States, soaring energy prices will affect the domestic price index of the United States and make CPI rise. Therefore, both the Federal Reserve and Biden administration hope that energy prices can be lowered, especially oil prices, because oil is the most widely used. Secondly, the rise in natural gas prices will indirectly lead to soaring inflation.

Secondly, Russia has always been a big energy exporter, and the export of natural gas and crude oil has always accounted for a large proportion. In this Russian-Ukrainian conflict, Russia has always wanted to use the energy shortage to exert pressure on European and American countries to relax their sanctions. Therefore, high oil prices are not a bad thing for him, and certainly not a good thing, because high oil prices can't bring profits to Russia. Now Russia's natural gas and crude oil are secretly sold to Europe at a discount, and only big countries with firm positions such as China and India dare to purchase Russian energy.

Once again, in European countries, high oil and gas prices are an absolute pressure for them, because inflation in their own countries is out of control, and the energy shortage problem cannot be solved in a short time. The oil shortage and gas shortage in the United States can still be stabilized by their own production, but once there is an energy crisis in Europe, it is really urgent. Therefore, Europe really wants Ukraine-Russia peace talks and crude oil to come down.

And oil-producing countries in the Middle East, These countries have been benefiting from the profits brought by high oil prices. The recent state of the oil market, It can be said that let them lie down and win all the time, The recent conflict in Yemen has also added fuel to the fire of high oil prices. In the face of Biden's attitude of repeatedly asking him to increase production, Uncharacteristically, several countries in the Middle East did not cooperate. It seems that they have been dissatisfied with being controlled before. In addition, after the outbreak of the Ukrainian-Russian War, there were Russia standing on the opposite side of European and American countries. Countries in the Middle East were not in a hurry to increase production.

Finally, there is the global oil demand. In the later period of the epidemic, the global demand recovered. In the face of a sharp drop in production and intensified conflicts, a large number of demands could not be met, resulting in a sharp rise in energy prices. However, the trend of the sharp rise was not unilateral, and the epidemic was repeated. In addition, the Ukrainian-Russian war fell into a delayed situation.Therefore, the prices of crude oil and natural gas naturally follow the repeated wars and epidemics, and there are ups and downs.

Just like recently, natural gas was originally in Q1 at the beginning of the year, and with the decrease of gas consumption in spring, it should fall on every high.However, because Russia has moved out of the "energy weapon", threatened to implement the embargo on crude oil and natural gas to Europe and the United States, and said that it must pay for natural gas in rubles, we all know that the United States has already eliminated it in order to sanction Russia. The swift payment system, such a requirement is actually embarrassing for both sides of the EUAt the same time, it also stimulates EU countries to wake up and not neglect their own actual interests and become pawns of others.

As a result, the natural gas that was falling back began to bottom out again.​​

​The United States has been talking about strengthening gas supply to Europe, but everyone knows that the amount of gas in the United States simply cannot meet the demand of Europe. According to the terms of the agreement,the United States will provide at least 15 billion cubic meters of liquefied natural gas to the European Union this year than originally planned. But last year alone, Russia exported more than 59 billion cubic meters of natural gas to Germany, a record high.

At present, natural gas is exposed to the pre-high pressure after surging, and it is possible to withdraw again. Under the expectation of repeated epidemics and negotiations between Ukraine and Russia, crude oil began to withdraw sharply, and once fell by 8% last night.

You see, the current energy market is a chess game in which the government Z economy and the interests are played by eight parties, which is really difficult to judge.

Fundamentally, however, flattening gas production and a modest rise in consumption do not support such a sharp rise

Inventory also continues the average inventory trend in the 5-year cycle. Due to more gas transmission to the EU, inventory is at a low level, which gives certain support to gas prices​​​​

​The price of crude oil is waiting for more information guidance at the OPEC meeting on Thursday. Because of the decision on the output in May, this decision will have a great impact on the oil market at present when crude oil fluctuates greatly.

However, it is reported that even if OPEC decides to raise the current daily output base by 400,000 barrels, it still cannot increase production because it has not yet reached the current quota level, that is, the current production capacity is not allowed, let alone a higher quota.

What's more, OPEC has little interest in managing the current high oil price, so they can lie down and win without the pressure from the United States. Why not?

In its latest comments this week, Emirati Energy Minister Suhail Al-Mazrouei said: "If the market is currently balanced, we will not increase resources in the market." This echoes OPEC's previous comments that today's oil price increase is not a fundamental issue of supply and demand, but a geopolitical issue.

Well, this is the current trend of oil and gas prices, which is quite complicated.

Regarding the trend of gas prices, we can deduce four results from the changes in Ukraine and Russia:

Due to the low inventory in various places years ago, the overall natural gas price should remain high in 2022, with the following three scenarios:

(1) If the conflict between Russia and Ukraine does not break out, the market will make seasonal adjustments according to the relationship between supply and demand. It is expected that the second quarter will drop to the low level of the whole year. In the third quarter, in order to ensure the smooth passage of the heating season, the main consumer places will start to replenish the stock, and the market demand will rise, and the price will rise accordingly. In the fourth quarter, the heating season will come, and the spot will be hot and the price will keep rising.

(2) If the Russian-Ukrainian conflict ends in a short time, The contest between the United States and Russia will intensify in the short term, Among them, the possibility of threatening the supply cut-off of natural gas pipelines is not ruled out. In the second quarter, the spot price of natural gas will fluctuate greatly within the day, and the overall price will rise. However, with the resolution of the incident, the supply will return to stability in the third quarter, and the market will be weakened by political events. However, due to the difficulty in replenishing the previous inventory, the market price will remain high.

(3) If the conflict between Russia and Ukraine lasts for a long time, the market will be affected by political factors for a long time, or there will be a long-term price increase, and Europe will not be excluded from the Russian pipeline supply completely, but the gap cannot be filled by other ways or means in the short term. In recent years, natural gas has steadily entered the ranks of "luxury goods".

$E-mini Nasdaq 100 - main 2206(NQmain)$   $YMmain(YMmain)$   $Gold - main 2206(GCmain)$   $Light Crude Oil - main 2205(CLmain)$   $China A50 Index - main 2204(CNmain)$