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Energy Futures Contracts Are Up 70-80% As The Explosive Rally Has Gone Parabolic

Wednesday, Mar 2 2022
Market Talk

Yesterday we said energy futures were up 60% since Early December, and today we can say that those same contracts are up 70-80% as the explosive rally has gone parabolic. 

While Russian energy exports have not been explicitly targeted (and in fact have been explicitly left off of official sanctions to try and avoid this exact type of price behavior) the reality is Russian commodities are seeing de-facto sanctions as buyers (and oil majors) around the world avoid any association with the country. 

Unfortunately, the reality is that in the near term the only solution to high prices without a rapid de-escalation in Ukraine is demand destruction as consumers become unable, or unwilling, to pay the higher prices.    

That expected demand destruction is visible in the forward pricing curve for WTI where 3 year forward values have actually moved lower over the past week even as prompt values have skyrocketed.   The concern over future demand is also visible in environmental credits which plummeted Tuesday as it appears that not only will energy consumption drop, but so too will the environmental movement as a priority compared with energy security.

ULSD highest since August 2008, on its way down from $4.15 in July 2008 to $1.13 in February 2009.  Hopefully the demand destruction this time around won’t be nearly as bad as it was then.

WTI highest since May 2011, as prices cooled following the “Arab Spring”.  WTI prices are now more than $150/barrel higher than they traded April 20 of 2000 when prices went to negative $40.

RBOB:  Highest since September 2012, after prices spiked following Hurricane Isaac.

Brent:  Highest since June 2014, just before prices collapsed as OPEC decided to have a price war with US Shale producers. 

Click here to download a PDF of today's TACenergy Market Talk.

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