‘We have got a critical situation. I really think we have a problem for the next six months…once it gets to these parabolic states, markets can move and they can spike quite a lot.’
That’s Jeremy Weir, who heads up Trafigura, one of the world’s largest commodity traders, sounding the alarm bell at the FT Global Boardroom conference on Tuesday, according to the Financial Times. He’s the latest bigwig to sound the alarm over the potential for global economic turmoil as the Russia-Ukraine war stokes energy-market volatility.
JPMorgan Chase & Co. CEO Jamie Dimon last week warned of a potential economic “hurricane.” Wars, Dimon said said, “have unintended consequences and this happens to be within the commodity markets of the world wheat, oil, gas and stuff like that which, in my view, will continue. We’re not taking the proper actions to protect Europe from what’s going to happen in oil in the short run and we’re not taking the proper actions to protect you all … it almost has to go up in price.”
A parabolic move would be one in which prices accelerate exponentially to the upside. Weir told the conference that oil prices were highly likely to hit $150 a barrel or more in coming months as the market wrestles with strains on supply chains as Russia attempts to shift oil exports away from Europe, the report said.
“If we see very high energy prices for a period of time we will eventually see demand destruction,” Weir said. “It will be problematic to sustain these levels and continue global growth.”
August Brent crude BRN00, 0.39% BRNQ22, 0.39%, the global benchmark, jumped 2.5% Wednesday to close at $123.58 a barrel, while July West Texas Intermediate crude CL.1, 0.28% CL00, 0.27% CLQ22, 0.32% rallied 2.5% to finish at $122.11 a barrel — the highest settlements for both grades since March 8. Crude rallied after data showed a rise in U.S. crude inventories but an unexpected drop in gasoline stocks. Both WTI and Brent are up by more than 30% since Russia’s Feb. 24 invasion of Ukraine.
Goldman Sachs on Tuesday said oil could hit $140 a barrel in coming months. Oil remains off its all-time high just shy of $150 a barrel set in 2008, but gasoline prices have hit records, with analysts blaming tight supplies of products on both sides of the Atlantic and limited refining capacity.
The S&P 500 energy sector, up by around 66% year to date, has left all other sectors in the dust, while the overall S&P 500 index SPX, -1.08% is down nearly 13% and the Dow Jones Industrial Average DJIA, -0.81% has slipped 9%.