Ukraine & Russia
The conflict in Ukraine enters another day with the fighting continuing to create a desperate situation on the ground. This morning, Russian forces have attempted to assault Kharkiv as a 40-mile-long convoy of Russian armoured vehicles are 15 miles north of Kyiv. Russian bombardments also yesterday killed several civilians and military personnel as the humanitarian crisis continues to get worse.
Oil
Following concerns voiced by the International Energy Agency over the widespread implications of the conflict in Ukraine, WTI crude futures have surpassed $110dpb for the first time since 2013. For example, yesterday evening IEA’s executive director Faith Birol said that the ongoing crisis and subsequent sanctions on Russia (who produce roughly 15% of the worlds oil) could cause significant disruption. Birol went further to state that the crisis was “putting the world economy at risk during a fragile stage of the recovery”. Indeed, the increase in price is despite the US and Japan agreeing to release 60m barrels from strategic oil reserves (where many inventories are already at two-year lows across the US). Hence all eyes will be focused on OPEC+ today to see whether they may increase supply to alleviate the surge in prices. However, the chances of this are slim given that yesterday OPEC+ signalled that they will keep to their existing strategy.
This morning, Brent is trading some 5.6% higher on the day at $110.9dpb while Crude is up 5.9% at $109.5dpb
Tube Strikes
The most recent strike caused by The Rail, Maritime and Transport (RMT) union is causing major disruption to London commuters. Since the London Mayoralty was established in 2000, there have been 102 strikes with 51 of these happening while Sadiq Khan has been in office – representing a considerable difference from “zero strikes” manifesto. Last Friday (25th February), the TfL was given a further £200m to ensure that its services kept running until June with this being the fourth time that ministers have bailed out TfL.
Interestingly, in 2015 researchers from the Oxford University found that widespread tube strikes in 2014 had resulted in roughly 5% of commuters finding more efficient routs which they subsequently adopted after the strikes. Hence, the researchers concluded that a net economic benefit was achieved stating that “by performing a cost-benefit analysis of the amount of time saved by those who changed their daily commute, the researchers found that the amount of time saved in the longer term actually outweighed the time lost by commuters during the strike.”
Wheat Prices
Wheat prices have also hit 14-year highs as markets fear a significant disruption in exports coming from Ukraine, and curtailments in supply given the sanctions on Russia. This is significant given that Russia and Ukraine account for ¼ of the world’s wheat supply. The increase in wheat prices is indicative of the wider implications of the conflict on agricultural produce, including corn, sunflower oil and barley.
Have a great day.
