Global crude supplies tightened as oil rallied above the $100 a barrel after the Russian President vowed to continue the war with Ukraine and rattled markets.
Rising oil price: impacts of continued war
As per Bloomberg News, the West Texas Intermediate futures rose by 0.6% after surging by around 7% in Asia on Tuesday. The war continued into the second month, with Putin saying that peace talks with Ukraine had reached a dead end. As per the Energy Information department forecast, the U.S. crude oil output will grow at a slower pace than previously anticipated.
Even as governments were trying to spur economic growth after the fading of the coronavirus pandemic, the war in Ukraine rippled across the global markets and fanned inflations. In the last few weeks, the crude prices were influenced by the massive release of strategic crude reserves by the U.S and its allies, while the coronavirus resurgence caused worry about China’s demand.
According to Mohammad Barkindo, the Secretary-general of OPEC, the losses per day on account of Russian oil supply losses due to sanctions and boycotts by customers was 7 million barrels a day. There are no signs of export distress yet among the few buyers, including Indian refiners buying the oil at a record discount price.
The crude oil output in the U.S. is estimated to average at 12.01 million barrels per day in 2022 compared to the earlier forecast of 12.03 million barrels a day as per the International Energy Agency (EIA).
Shale producers struggle with higher labor and production costs due to rampant inflation. On Wednesday, the EIA will share a snapshot of the overall market.
The prices of Brent and oil gained on Tuesday. Brent June futures gained 0.5% to $105.17 on the ICE Futures Europe exchange after surging to 6.3 %. The WTI May Future deliveries rose to $101.15 a barrel, up by 0.6%.
The Brent futures remained in reversal mode. The near-dated futures contracts were more expensive than the later-dated ones, even though the prices have eased over the past week. The global benchmark time spread for a backwardation was 52 cents a barrel compared to $1.53 at the beginning of last week.
The American Petrol Institute separately reported that the crude oil stockpile increased by 7.76 million barrels last week as per information from people familiar with data. The inventories of Gasoline shrunk by 5.05 million barrels as per API. The EIA will release its official data on Wednesday.
