Oil set to post weekly loss as investors look to silver lining

0

Benchmark oil prices had a rollercoaster week, but the bears won the uphill battle as the two major benchmarks headed for their biggest weekly decline since November as investors looked for ways to remedy the disruptions in Russian oil supply in a tight market.

Oil prices soared after Russia invaded Ukraine and hit their highest level since 2008 on Monday. The global benchmark, Brent crude oil futures, which rose more than 20% last week, is on track for a weekly decline of around 7.6% after hitting a 14-year high at $139.13 on Monday.

The same has happened with the benchmark US, as West Texas Intermediate (WTI) crude is heading for a weekly decline of around 8.4% after hitting a high of 130.50. $ Monday, also a 14-year high.

What you should know

  • In summary, the volatility observed in the market is the result of the Russian-Ukrainian conflict which caused the United States and many Western oil companies to stop buying Russian oil.
  • This has prompted discussions about potential additions to supply from Iran, Venezuela and the United Arab Emirates (UAE). Since Monday, both benchmarks have pulled back on their advances on hopes that those producing countries might get back into the market and the UAE would act to boost supply.
  • UBS Chief Economics Officer Norbert Ruecker said: “We closely monitor the pressure valves which will absorb the supply shock. These include more strategic storage releases, more US shale oil, and more oil from oil-producing countries, including the element of high diplomatic cost that the West is willing to bear by possibly allowing Iran and even in Venezuela to get back into the market, and ultimately the economic costs through high fuel prices that dampen demand and temporarily slow growth.
  • Russian producer Surgutneftegaz is also allowing buyers from China, the world’s largest oil importer, to receive oil without providing letters of credit (LC) to circumvent Western sanctions, also easing bullish supply concerns, it said. said three people familiar with the matter.
  • Russia vies with Saudi Arabia for the position of the world’s largest exporter of crude oil and petroleum products combined, with exports of around 7 million bpd accounting for 7% of global supply. The European Union, heavily dependent on Russian energy, however, did not join the United States and Britain in banning Russian oil.
  • Commonwealth Bank analyst Vivek Dhar explained that in the short term, supply shortfalls are unlikely to be filled by additional production from members of the Organization of the Petroleum Exporting Countries and its allies (OPEC+), given that Russia is part of the cartel.

OPEC+ member Iran has yet to strike a nuclear deal with world powers that could release its sanctions barrels to market, but Europe’s top diplomat said talks on a nearly completed were”on break.” Additionally, some OPEC+ producers, including Angola and Nigeria, have struggled to meet production targets, limiting the group’s ability to offset Russian supply losses.


Source link

Share.

Comments are closed.