Oil markets recovered from last week’s worst selloff in two years on Monday, thanks to new Western sanctions against Russia and a rise in Saudi selling prices, pushing US crude back above $100 per barrel.
As the number of civilian deaths in Ukraine has increased, so has pressure on European countries to impose sanctions on Russia’s energy sector. Participants in the market are now concerned about potential supply disruptions.
Saudi Aramco (SE:2222) raised its official selling prices for crude oil to all destinations in May, as Riyadh and its state oil firm milked the current oil crisis for all it was worth.
London-traded Following a session high of $108.54 earlier in the day, global oil benchmark Brent rose $2.17, or 2.1 percent, to $106.56 per barrel by 2:00 PM ET (18:00 GMT). Brent’s weekly drop was the largest since April 2020, when it fell 13%. The company increased by 39% in the first quarter.
Brent crude oil, denoted by the symbol “WTI” on the New York Mercantile Exchange, rose $3.03 to $102.20 per barrel after reaching an intraday high of $103.69. Both WTI and Brent fell below the critical $100 support level last week, marking their worst week since April 2020. However, by the end of the first quarter, it had increased by 33%.
Brent and WTI were both down more than 1% earlier in the session, following last week’s drop on news that the UN had brokered Yemen’s first-ever two-month truce between a Saudi-led coalition and Iran-aligned Houthis.
Since last week, the United States has released up to 1 million barrels per day from its Strategic Petroleum Reserve for a six-month period beginning in May, causing the oil market to fall last week. According to Biden, this release will be the third in the last six months as a stopgap measure until domestic producers can increase output and bring supply and demand back into balance.
Last week, a Covid-19 lockdown in China’s most populous city weighed on oil prices, as China is the world’s largest oil importer. Due to an increase in coronavirus cases in China, Qingming holiday travel is expected to be 20% less congested on the roads and 55% less congested in the skies.
Despite the Yemen peace agreement, the release of US reserves, and concerns about China’s demand, crude prices rose on Monday as analysts raised supply concerns once again.
According to an analyst at Chicago-based broker Price Futures Group, the release of oil reserves in particular could “create distortions in a market that is already facing tremendous challenges” and force oil buyers to pay more in the future.
By looking at the back end of the oil curve, the market appears to be predicting that this will have a short-term impact on oil prices, according to Flynn. The oil curve’s front end has been abandoned in favour of long-term contracts such as December 2022, 2023, and 2024.”