Stocks and oil made steady gains on 1 March, amid a lull in the volatility sparked by the war in Ukraine and the sanctions placed on Russia.
Treasuries slipped back after surging during the Wall Street session on risk aversion and month-end rebalancing. The dollar was little changed. Oil pushed higher as traders balanced the possible release of emergency stockpiles against fears of disruption to Russian energy exports.
Russia’s markets remain under pressure after the US and its allies moved to block the Bank of Russia’s access to foreign reserves and cut some lenders off from the SWIFT messaging system for global banking.
Russia is the world’s third-biggest oil producer and the second-most influential member of the OPEC+ alliance behind Saudi Arabia.
The US oil benchmark whipsawed around $100 a barrel following the Russia-Ukraine crisis, as the market digested the impact of mounting financial penalties against Russia, Bloomberg reported.
Brent in London rallied above $105 at one point, with Goldman Sachs Group Inc. saying demand destruction is the only thing that can stop oil shooting even higher. The bank has raised it’s one-month forecast for the global crude benchmark to $115 with significant upside risk.
Futures in New York rose almost 1% in Asia after advancing 4.5% on Monday as sanctions on Russia rippled through the market.
A release of 60 million barrels is being considered by the U.S. and others, according to people familiar, which would be equivalent to less than six days of Russian output, Bloomberg reported.
The International Energy Agency, meanwhile, will hold an extraordinary ministerial meeting on Tuesday, Executive Director Fatih Birol said on Twitter.
Oil and commodity markets increase inflationary pressures
The invasion of Ukraine has upended commodity markets from oil to gas and wheat, increasing inflationary pressure on governments seeking to encourage economic growth after the pandemic.
While the U.S. and Europe have so far stopped short of imposing sanctions directly on Russian commodities, the trade in those raw materials is seizing up as banks pull financing and shipping costs surge.
The turmoil sparked by the invasion is likely to make the task of balancing the tightening market harder for OPEC+, which meets Wednesday to discuss output policy. Delegates said the cartel will probably stick to its plan of only gradually increasing supply. The group’s Joint Technical Committee, which analyzes the market on behalf of ministers, meets later on Tuesday.
“Any SPR release would only be a short term solution, particularly if Russian oil flows were significantly disrupted,” said Warren Patterson, Singapore-based head of commodities strategy at ING Groep NV.
“I do not believe the market is pricing in a significant impact to Russian oil exports, and so that leaves a lot of upside risk if the situation deteriorates further.”
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