Brent crude rallies to top $100 after an IEA warning about a Russian supply shortfall
Oilrallied to around $100 a barrel on Thursday after the IEA warned of supply risks due to a drop in Russian output from April.
- While demand could shrink by 1.1 million bpd, 3 million bpd will be shut in due to the Russia-Ukraine crisis, it said.
Oil prices rose to top $100 a barrel on Thursday, coming back from a slide the previous session, after the IEA warned a coming fall in Russian supply won't make up for an expected drop in demand.
The gains were also aided by a weaker dollar, which pulled back from two-year highs after the US Federal Reserve increased interest rates on Wednesday for the first time since 2018.
Brent crude gained 5.2% to trade at $103.15 a barrel, but was still heading for a 5% loss this week. West Texas Intermediate crude was up 4.8% at $99.67 a barrel, on track for a similar weekly decline.
The threat of disruption to Russian oil supply has driven the price of crude oil higher in volatile trade since President Vladimir Putin's forces invaded
The market is concerned about a potential supply shock from bans by the US and its allies on Russian oil imports, and the risk that Putin might decide to divert supply in retaliation for Western
About 3 million barrels a day of Russian oil output could be shut in from April, the IEA estimated in its monthly oil market report published Wednesday. The drop will come as Western embargoes set in and buyers stay away from the country's exports.
The IEA expects global demand to shrink as a result of the surge in oil prices — but by just 1.1 million barrels a day, far below the Russian loss of supply.
"This discrepancy is likely to become even bigger in the coming months given the anticipated decline in Russian oil production. The IEA therefore predicts a significantly undersupplied oil market in the second quarter," Commerzbank strategists said.
Earlier in March, OPEC's secretary general, Mohammed Barkindo, said there is no capacity in the world that could replace Russia's 7 million of barrels per day.
If OPEC raises its oil production as planned in the second half of 2022, the market will be virtually balanced, the Commerzbank strategists said — a "marked change" from their previous forecast for an oversupplied market.
"Over the past week a lot of financial positions have been flushed out, but a tight, physical market remains with widespread voluntary sanctions towards Russian oil and product exports still at work," Bjarne Schieldrop, chief
"The Brent crude
Crude oil was also getting a boost Thursday from a fall in the dollar, which makes it cheaper for holders of other currencies to buy. The US dollar index was down 0.3% at 98.29 at last check.
On the demand side, analysts pointed to the surge in cases of COVID-19 in China as a concern. The speed at which the Omicron variant is spreading means the outbreak could be very bad, with millions of infections, according to SEB's Schieldrop.
"Not only would this hurt oil demand directly due to Chinese lock-downs and reduced mobility. It would also hurt the global economy with reduced supply of products and spare parts flowing out of China," he said.
Read more: Wladimir Klitschko is fighting on the front line to defend Ukraine. The head of the boxing legend's $100 million family office breaks down his value investing philosophy - and why he focuses on disruptive tech and commodities in particular
- India may require 31,000 pilots in next 20 years: Boeing
- Unlike global economy, India would not slow down: RBI article
- Tier-1 cities’ home sales is 2x of what it’s in tier-2 cities: PropEquity
- Thomas Cook India, SOTC launch Green Carpet to help companies manage carbon emissions of biz travel
- Moody's downgrades outlook for UBS to negative, after Credit Suisse take over