Brent Price Falls by $7 over Contract Rollover

Brent Price Falls by $7 over Contract Rollover

Brent crude oil prices opened at $116 per barrel on Wednesday, nearly $7 lower than Tuesday evening, mainly due to the rollover to the August contract, Commerzbank said in a Wednesday note.

The gas oil crack spread had also climbed on Tuesday to peak at $40/b, as the European Union’s Russian oil embargo is also expected to affect oil products and Russia has been a crucial diesel supplier to Europe, the bank noted.

Commerzbank also attributed the Tuesday evening price slide to reports that the Organization of the Petroleum Exporting Countries is considering exempting Russia from the production targets agreement.

Russia is seen to be unable to boost oil output as planned due to sanctions, with production already 1.3 million barrels per day below the agreed level in April. READ: Oil Prices Near 7-Year High on Tight Supply

With the exemption of Russia, Saudi Arabia and other countries with spare capacities would have an opportunity to step up production to a greater extent, the bank said.

The price of a barrel of Brent crude hit $123 on the back of the EU deal, as well as the continued reopening of Shanghai and the better than expected Chinese purchasing manager index (PMI).

The gradual phasing in of the deal along with the exemptions included prevented the price from rising much higher but ultimately it further tightens a market that’s already undersupplied.

The reopenings in China are another major bullish factor for crude prices, for obvious reasons. While the manufacturing and non-manufacturing PMIs were both still contractionary, they were also much better than expected and a significant improvement in April.

The lifting of restrictions will see these improve further which will be another upside risk for oil prices. # Brent Price Falls by $7 over Contract Rollover # Brent Price Falls by $7 over Contract Rollover