Oil up 2% as West Mulls More Russia Sanctions, Saudis Hike Selling Prices
2022.04.04 21:12
By Barani Krishnan
Investing.com — From more Western sanctions planned for Russia to a hike in Saudi selling prices, oil markets found enough motivation to rebound from last week’s worst selloff in two years to put U.S. crude back above $100 per barrel on Monday.
Mounting civilian deaths in Ukraine increased pressure on European countries to impose sanctions on Russia’s energy sector, prompting new concerns from market participants around tighter supply.
Saudi Aramco (SE:2222), meanwhile, raised its official selling prices for crude to be sold to all destinations in May, as Riyadh and its state oil firm continued milking the current oil crisis for what it’s worth.
London-traded Brent, the global oil benchmark, rose $2.17, or 2.1%, to $106.56 per barrel by 2:00 PM ET (18:00 GMT), after a session high at $108.54. Brent fell 13% last week for its biggest weekly decline since April 2020. Even so, it finished the first quarter up 39%.
New York-traded U.S. crude benchmark West Texas Intermediate, or WTI, gained $2.93, or 3%, to $102.20 a barrel, after an intraday high of $103.69. WTI settled below the key $100 support last week as it fell about 13% just like Brent for its worst week since April 2020. It, however, settled the first quarter up 33%.
Brent and WTI were down more than 1% each earlier in the session when they reopened from last week’s tumble on news that the United Nations has brokered a first-ever two-month truce between a Saudi-led coalition and Iran-aligned Houthis in the seven-year war over Yemen.
Last week’s selloff was triggered by President Joe Biden’s announcement that the United States will release up to 1 million barrels daily from its Strategic Petroleum Reserve for six months beginning May. The release, the third in the past six months, will serve as a bridge until domestic producers can boost output and bring supply back into balance with demand, Biden said.
Also weighing on oil last week were demand concerns in China, the world’s top oil importer, where the most populous city, Shanghai, remained in a Covid-19 lockdown. China’s transport ministry said it expects a 20% drop in road traffic and a 55% fall in flights during the three-day Qingming holiday due to a flare-up of coronavirus cases in the country.
Despite the Yemen peace pact, U.S. reserves release and China demand concerns, crude prices rebounded Monday as tight supply concerns returned to the fore, analysts said.
The reserves release, particularly, might “create distortions in a market that is already facing tremendous challenges,” and make oil buyers pay more in the future, said Phil Flynn, analyst at Chicago-based broker Price Futures Group.
“If you look at the back end of the oil curve what seems to be happening is that the market is predicting that this is going to have a short-term impact on price,” said Flynn. “We have seen people roll out of the front end of the oil curve and get long contracts like December 2022, December 2023, and December of 2024 while abandoning the front end of the curve.”
