Oil Settles Lower as Markets Price in Russia-Ukraine War
Oil prices settle lower as markets price in Russia’s war and uncertainties that following the global energy crunch in the last five trading sessions when crude prices fluctuation hit the rooftop.
Brent’s price has slowdown after it advanced near $140 per barrel early in the following a flurry of sanctions on Russia’s invasion into Ukraine which has unsettled the global financial markets, and driven up energy costs in Europe, the United States among others.
Since Sunday when the United States hinted about a ban on Russia’s crude, oil prices have been trading on the upside with Brent hitting over $139 – a level seen pre-2013/201. Benchmark Brent crude traded at $110.47 per barrel Friday, posting a 1.17% gain from the Monday session that opened at $109.19 a barrel.
Today, President Vladimir Putin said talks with its neighbour country, Ukraine is advancing positively, thus calming down the global market’s temperature that saw the ruble strengthen moderately.
Brent further rose to $139.13 in intraday trading on Monday, recording a 27.42% increase from the opening price, according to market data, then halted the uptrend due to uncertainties.
American benchmark West Texas Intermediate (WTI) registered at $106.97 per barrel at the same time on Friday, increasing 1.04% relative to the opening price of $105.86 a barrel on Monday.
WTI reached as high as $130.50 a barrel later on Monday, posting a 23.3% gain relative to Monday’s opening. Trading data for the week shows that oil prices started the week with a rapid increase with Brent crude recording a 13% rise to $139 a barrel on Monday’s trade, before relapsing to $109 a barrel on Thursday.
Prices became volatile after a US announcement on Sunday that it was considering banning Russian oil following the country’s previous sanctions targeting the Russian economy.
Confirmation that the US was going ahead with sanctions came Wednesday, prompting almost a 5% jump in crude prices. Experts say the impact of the ban on the US would be minimal, only impacting about 100,000 barrels per day (bpd) of crude exports from Russia.
Nevertheless, the effect in Europe is set to be larger, and European countries were reluctant to impose any sanctions on the Russian energy sector as the bloc imports 40% of its natural gas and 30% of oil from Russia.
The UK imposed its own curbs on Russian oil supplies and said it will phase out its purchases from Russia by the end of the year.
The European Commission on Tuesday proposed their ‘REPowerEU’ plan to stop Europe’s dependence on Russian fossil fuels before 2030, starting with gas, after the bloc’s energy sources came under threat with Russia’s invasion of Ukraine.
Meanwhile, Germany on Monday ruled out banning energy imports from Russia despite plans by the US and several European allies to adopt tougher sanctions on Moscow in response to Russia’s invasion of Ukraine.
To alleviate supply concerns, the US is now turning to Iran and Venezuela as alternative oil sources after banning Russian oil. However, experts say any short-term production from these countries would not be enough to compensate for the loss of Russian oil.
More output from the OPEC+ group could also plug the supply gap, but these producers are reluctant to increase output, saying ‘the current oil market fundamentals and the consensus on its outlook pointed to a well-balanced market, and that the current volatility is not caused by changes in market fundamentals but by current geopolitical developments.’
Due to technical issues and capacity constraints, the OPEC+ alliance has only been able to pump 280,000 bpd of oil, relative to the planned increase of 400,000 bpd in January, according to the International Energy Agency. #Oil Settles Lower as Markets Price in Russia-Ukraine War
READ: IMF Says Russia-Ukraine Crisis to Impact Africa Economy
