Written on: March 1, 2022

Energy Price Report March 2022

Tuesday, March 1, 2022

Early Trading

Brent crude futures are rallying over six percent and WTI futures are up by over five percent in early morning trading as a Russian military column moved towards the Ukrainian capital, even as stocks fell and the dollar strengthened amid the same news.  Economic data from Europe were lackluster, likely also weighing on equities.  Energy traders are looking ahead to German retail sales and inflation, Canadian GDP, and US manufacturing sector and construction spending data for further direction.

Russian Markets

Reuters reports that satellite images from Maxar show Russian tanks and fuel trucks bearing down on Kyiv in a column stretching for 40 miles along a highway.  Russia is imposing capital controls, following investor flight amid Western sanctions.  The MSCI Russia ETF fell 50% to a record low.  Yesterday, the US imposed sanctions on the Russian central bank, finance ministry, and national wealth fund, blocking Americans from engaging in transactions with those entities, significantly hampering Russia’s ability to use a $630bn war chest of foreign reserves to support the ruble.  Treasury also issued a general license authorizing certain energy-related transactions through June 24.

Overseas Markets

Asian shares strengthened overnight, with the Hang Seng adding 0.21%, the Shanghai Composite gaining 0.77%, and the Nikkei rallying 1.20%.  The final February Nikkei Manufacturing PMI for Japan for last month came in at 52.7, indicating slow expansion in the sector, and the February China CFLP and Caixin Manufacturing PMI both beat expectations by coming in at 50.2 and 50.4, respectively – just above breakeven.  European shares were falling once again today, with the FTSE 100 down 1.1% and sell-offs of 2.7% in the DAX and 2.9% in the CAC 40.  The final Markit manufacturing PMI for Germany saw a surprise downward revision from the flash estimate to 58.4 this month, as did the French index down to 57.2, and the index for the Eurozone as a whole (to 58.2).  The final CIPS/Markit Manufacturing PMI for the UK, on the other hand, came in at 58.0 – a surprise upward revision from the flash estimate.

Refined Products Gained Yesterday

Energy prices rallied to gains of between 2.6% (gasoline) and 5.8% (heating oil) yesterday amid the exclusion of some Russian banks from the SWIFT banking communications system and a $15/bbl upward revision to Goldman Sachs’ near-term Brent price forecast.  Brent crude closed $3.46 higher at $101.39 a barrel, WTI crude settled $4.13 stronger at $95.72, gasoline futures gained 6.97 cents, settling at $2.7970 per gallon well behind a 16.39-cent rally in heating oil, which settled at $3.0134 per gallon.  Natural gas futures slipped 1.5% lower yesterday with unsupportive shifts to the temperature and US market balance outlook, despite concern over Russian gas supplies to Europe.

Weather Outlook

The latest 1-5 day ECMWF outlook sees mostly above-normal temperatures across the country, save for parts of the Northeast where below-normal temperature are expected. The 6-10 day outlook sees above-normal temperatures across the eastern third of the country, but below-normal temperatures elsewhere.