Oil has craziest week on record with war-torn markets
Oil started to climb again at the end of a week where prices have hovered in the $20 range since Russia’s invasion of Ukraine rocked global markets and stoked oil shortage fears. ‘supply.
New York futures rose 5.7% on Friday, en route to a weekly gain of more than 20%. Brent has traded in its biggest range since the futures contract was launched in 1988 – eclipsing the wild swings of the 2008 global financial crisis and when demand plunged in the coronavirus pandemic. The rally only paused briefly on Thursday as diplomats signaled that negotiations with Iran were nearing some sort of resolution that could pave the way for a lifting of oil sanctions.
“There has been nothing to take advantage of this market and we have had one-way volatility, which means higher prices,” said Rob Haworth, senior investment strategist at US Bank Wealth Management. To drive prices down, the market would need to see a significant change in drilling activity from OPEC or the United States, he said.
Prices soared on Friday after Ukrainian officials said Russian forces attacked a nuclear power plant, the largest in Europe. While the likelihood of a major Russian supply disruption has pushed prices higher this week, signs that an Iranian nuclear deal could be close have added to price volatility.
The International Energy Agency has warned that global energy security is at risk and that a planned release of emergency oil reserves by the United States and other major economies has so far failed allay supply concerns. JPMorgan Chase & Co. said global benchmark Brent could end the year at $185 a barrel if Russian supplies continue to be disrupted, and some hedge funds are eyeing $200.
The invasion affected the entire energy sector. Global oil majors such as BP Plc, Shell Plc and Exxon Mobil Corp. are leaving Russia, buyers of his rough are looking for alternatives and shipping costs are skyrocketing. Russia’s Lukoil PJSC called for a “rapid resolution of the military conflict”.
Although no sanctions have been imposed on Russian energy exports, buyers are avoiding domestic crude as they face financial sanctions. Germany and the White House oppose a ban on Russian oil imports, though support from US lawmakers for banning shipments to America is growing.
- West Texas Intermediate for April delivery gained $4.37 to $112.04 a barrel as of 11:29 a.m. New York.
- Brent for May settlement rose $4.11 to $114.62 a barrel.
The head of the world’s atomic watchdog said his trip to Tehran on Saturday could “pave the way” for reviving the Iran nuclear deal, a pact that would see the return of official oil exports. The OPEC producer has millions of barrels of oil stored offshore that could flow in quickly in a tight market.
Brent remains in deep lag, a bullish structure where fast barrels are more expensive than later cargoes, signaling a tight supply-demand balance. The quick break from the benchmark was $3.97 a barrel after hitting record highs in recent days.
Against this backdrop, OPEC+ stuck to its planned gradual increase in supply in April at its monthly meeting on Wednesday, wrapping up the rally in record time without discussing the invasion of Ukraine. Russia is one of the main leaders of the cartel, along with Saudi Arabia. IEA Executive Director Fatih Birol said earlier this week that the outcome of the meeting was “disappointing”.