Oil Falls as Russian Troops Pull Out of Ukrainian Border
Crude oil prices fall as tensions ease, but the market is still nervous about a disruption of supplies if the conflict escalates between Russia and Ukraine. Earlier today, Russian military units returned to their bases from near Ukraine as they have finished exercises.
As crude oil moves closer to $100 per barrel, market participants were willing to pay more for oil with a short-term delivery date on a growing probability of supply disruptions amid the Russia-Ukraine conflict, Commerzbank said in a Tuesday note.
Brent dipped for a time to $94/b. Meanwhile, West Texas Intermediate fell to $92/b. Both contracts are at their highest levels in nearly 7.5 years, the bank noted.
Russia exported roughly 4.7 million barrels of crude oil per day, and if a significant portion of this becomes unavailable due to a military conflict, the sanctions imposed in response by the West or Russian retaliation to such sanctions, the market would tighten substantially, according to Commerzbank.
Russia’s Sergei Lavrov reportedly told President Vladimir Putin that he supports continued diplomatic efforts, while Ukrainian Security Council chief, Oleksiy Danilov, said the council saw no imminent full-scale attack, the bank wrote.
Meanwhile, Fatih Birol, head of the International Energy Agency, said members of the Organization of the Petroleum Exporting Countries and allied producers, or OPEC+, should pump more oil to balance markets as output from the US, Canada and Brazil are unable to bridge the gap, ANZ Bank said.
Separately, OPEC’s chief said the group is facing underinvestment. Iran will reportedly dig in on key demands impeding the restoration of the 2015 nuclear deal, but envoy Hossein Amirabdollahian said a good deal within the logical framework of negotiations is within reach, raising the prospect of Iranian oil hitting the market, the bank wrote.
Crude oil prices dropped almost 4% Tuesday morning following news that Russian military units have returned to their bases from near Ukraine as they have finished exercises.
“We’ve always said the troops will return to their bases after the exercises are over. This is the case this time as well,” Kremlin spokesperson Dmitry Peskov said in a report by CNBCTV18.com. According to Western military analysts, it is too soon to determine the extent of any de-escalation; report said.
Nigerian Crude Offers Ease
Offers for some cargoes of Nigerian crude were easing slightly in a bid to entice reluctant European buyers. Offers for Qua Iboe crude slipped below dated Brent plus $3 a barrel for the first time in two months, as market backwardation and freight rates made sales to Europe less economical for buyers.
Swift sales to India and Indonesia buttressed differentials in recent weeks, but with requirements in those markets largely filled, the European refiners are the last likely outlet for lighter and medium West African crude.
Offers for Angolan crude remained largely steady from Monday, with Cabinda and Girassol offered at and above dated Brent plus $3 a barrel. Traders expected the last 3-4 cargoes of Angolan crude to be sold well below offer levels as a skyrocketing Dubai-Brent spread was undercutting Asian demand.
The exchange for swaps between the differently priced crude types hit $5.69 a barrel on Tuesday – the highest premium for Brent over Dubai since 2013. Read: Oil Prices Pull Back as U.S Crude Inventories Rise
Mideast and Russian crude grades, therefore, have an advantage over Brent-linked crude from West Africa. Provisional export plans for April-loading Angolan crude were expected imminently.
An upward revision in historical oil demand by the International Energy Agency in its monthly report points to a tighter global market than the West’s energy watchdog had previously estimated.
