International oil prices will re-close the weekly Yang line after a lapse of two weeks, as the market is widely worried that the sanctions imposed on Russia, the world's second largest crude oil exporter, will lead to tight supply, while the attack on Saudi oil facilities and the decline in US crude oil inventories further exacerbated such concerns. The U.S. and allies' consideration of releasing more oil from their reserves calmed the market a little.
International oil prices will re-close the weekly Yang line after a lapse of two weeks, as the market is widely worried that the sanctions imposed on Russia, the world's second largest crude oil exporter, will lead to tight supply, and such worries have been further exacerbated by the attack on Saudi oil facilities and the decline in crude oil inventories in the United States . . The U.S. and allies' consideration of releasing more oil from their reserves calmed the market a little.
As of press time, NYMEX crude oil futures have risen 5.54% this week to $108.91 per barrel; ICE futures have risen 6.46% this week to $112.20 per barrel.
EU still divided over sanctions on Russian energy
Russia said on Wednesday that "unfriendly" countries, including members of the European Union, must start buying Russian oil and gas in rubles . This has heightened concerns about possible disruptions to European gas supplies.
While the U.S. and U.K. have targeted Russian energy for sanctions, Germany has warned against moving too quickly because European energy prices are already high. According to BP data, in 2020, 29% of European crude oil imports and 39% of imported oil products came from Russia.
OPEC officials believe a ban on oil imports from partner Russia would harm consumers, OPEC sources said, and the group has expressed concerns to EU authorities.
"The proposed ban is still some way from becoming policy as a considerable number of EU countries oppose it," analysts at the Commonwealth Bank of Australia (CBA) wrote in a note. The issue of the ban is a major shift.” Further adding to supply concerns is the
blockage of the Caspian pipeline
that supplies oil to the Black Sea (CPC) from Russia and Kazakhstan. A Russian official said on Tuesday (March 22) that oil exports could fall by 1 million barrels per day, or about 1% of global oil production, due to storm damage.
Kazakhstan meets about 1.2% of global oil demand. Most of the country's crude oil is transported via the Caspian Pipeline Consortium (CPC) to the Russian port of Novorossiysk, where it is loaded onto ships and shipped around the world. The United States has imposed sanctions on Russian oil, but said oil supplies from Kazakhstan through Russia should not be interrupted.
Canada has the ability to increase oil and gas exports by up to 300,000 barrels per day (bpd) by the end of 2022 to help ease global energy security concerns over Russia's invasion of Ukraine, Natural Resources Minister Jonathan Wilkinson said on Thursday.
But major global trading firms such as Vitol and Trafigura said on Tuesday they estimated current Russian oil supplies to fall by 2 million to 3 million bpd. They said the world could barely cope with a supply cut of more than 2 million bpd, which would lead to further price spikes and a recession.
"Energy traders appear to be increasingly convinced that a supply shortage is just around the corner, and it now appears that risks are increasing, which could push crude prices higher," OANDA analyst Edward Moya said in a note.
OANDA senior analyst Jeffrey Halley said in a statement. Even if the war in Ukraine ends tomorrow, the world will face structural energy shortages as Russia faces protracted sanctions, the report said. Investors wonder how much Russia will cut supply and what new impact it will have on an already tight market.
Houthis attack Saudi oil facility
The Saudi-led coalition destroyed two ships laden with explosives on Wednesday, citing a plan by Yemen's Houthis to attack oil tankers south of the Red Sea, state television reported. The Houthis are recognized as Iran's political proxies.
The Houthis attacked Saudi Aramco facilities with missiles and drones over the weekend, causing a brief drop in output at an oil refinery. Saudi Arabia has since said it is not responsible for any shortages in global oil supplies. This shows Saudi Arabia's growing dissatisfaction with the U.S. handling of Yemen and Iran.
In comments to state news agency SPA, a Saudi foreign ministry official said such attacks had serious consequences for the upstream and downstream sectors, affecting "the kingdom's ability to produce and meet its obligations".
Asked about the announcement during a webcast, Saudi Aramco Chief Executive Nasser said: "In a very tight market, these types of attacks are a real concern for the world...if supply continues to escalate, it could be a real concern for the world. There is some supply impact."
The latest report from the Organization of the Petroleum Exporting Countries and its partners (OPEC+) shows that some producers are still not meeting their agreed supply quotas. OPEC+ output in February was more than 1 million bpd below target, the sources said.
"We estimate the difference between the OPEC+ production target and actual output last month was just over 800,000 bpd and will increase to 1.15 million bpd in March," consultancy JBC Energy said in a note.
U.S. inventories fell, ready to release reserves
In addition to the turmoil in the geopolitical situation, the decline in U.S. crude oil inventories also boosted oil prices. U.S. commercial crude inventories fell by 2.508 million barrels last week, while inventories in the U.S. Strategic Petroleum Reserve fell by 4.2 million barrels, the U.S. Energy Information Administration ( EIA ) said on Wednesday.