Oil Price Soars Amid Russia Export Ban

Published on
  • Brent crude hovers at $83 a barrel as supply concerns weigh
  • Retail sales show 27th December more popular than Boxing Day
  • Tesla share price suffers amid production fears

Oil Price Rises

The ban of exports for nations adhering to Russian price caps adds fuel to the anxieties around supply. This comes at the same time as China plans to reopen, which means oil demand is set to surge. While supply and demand dynamics continue to compete in this way, the oil price will remain elevated.

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To some extent, the export ban will have been priced in already – Russia readily applying pressure to countries which enforce unhelpful policies isn’t a new or unexpected tactic. The shock in the oil price that we’ve seen today isn’t as bad as it could have been and is likely to calm down, at least partly, in the coming weeks.

Depending on the trajectory of China’s economic expansion following the reopening of its borders and manufacturing capabilities, there could be some further spikes in the oil price coming through the pipes in the new year.

Latest retail sales figures show that 50% more people headed to the shops as of noon on the 27th, compared to Boxing Day. This is the latest set of info that suggests Boxing Day no longer holds as a retail super-spending day as it once had. Post-Christmas sales so far are markedly below pre-pandemic times, as the cost-of-living crisis and structural decline in high street footfall take their toll.

Retail parks have had a more optimistic showing, with performance there doing better. This is largely down to the prevalence of supermarkets in these areas – people have needed to replenish their groceries, cost crisis or not.

By some estimates, consumers are expected to spend £18 less each on post-Christmas sales this year, which might not sound like a lot on an individual basis, but in aggregate this adds up to a major loss of revenues for retailers.

Tesla has had a torrid time, with a sharp sell-off coming through amid news the carmaker plans to extend a reduced production schedule at its Shanghai factory into the new year.

This raises question marks about the group’s quarterly performance which will be unveiled in the coming weeks. The market remains highly sensitive to Tesla in the higher-interest-rate environment and any potential for disappointment on production and margins is still being harshly punished.

Article by Sophie Lund-Yates, Lead Equity Analyst at Hargreaves Lansdown