“The current realistic scenario is that a large part of Russian crude oil, as well as refined oil products, will cease to be noticeable in the market and will create a supply deficit for the duration of the armed conflict,” said Rystad Energy analyst Louise Dickson. .
Brent crude futures hit a high of $113.94 a barrel before falling as low as $110.09, up $5.12 or 4.9% on the day. For its part, US West Texas Intermediate (WTI) crude futures hit a high of $112.51 a barrel, and were up $4.64, or 4.5%, at $108.05.
On the day, global benchmark indices retreated from previous highs after Brent hit its highest level since 2014, while US crude rose to a peak not seen since 2011.
Both contracts trimmed gains after US Federal Reserve Chairman Jerome Powell said the central bank will raise interest rates multiple times to quell inflation.
“Demand destruction – through even higher prices – is now probably the only sufficient rebalancing mechanism,” a Goldman Sachs analyst said in a note.
Relief in the form of more supply is unlikely in the short term. The Organization of the Petroleum Exporting Countries and its allies, including Russia, stuck to their long-term plan to increase output by just 400,000 barrels a day at a brief meeting on Wednesday.
Oil supply, the great debate
Some analysts are beginning to warn that Vladimir Putin will use gas and oil as a “weapon” against Western-imposed sanctions. “Russia’s energy supplies are at great risk, either because they were held up as a weapon by Russia or taken off the market due to sanctions,” Louise Dickson, senior oil market analyst at Rystad Energy, wrote in a report Monday. .
World oil supply was already not keeping up with demand. If Russia, the world’s second-largest oil producer, were to intentionally withhold supply, it would likely send crude prices soaring, dealing a heavy blow to consumers around the globe.
JPMorgan warned that oil would rise to $150 a barrel if Russia’s exports were cut in half. “It’s a wild card if Russia actually cuts those flows to try to inflict pain through commodities,” said Ryan Fitzmaurice, energy strategist at Rabobank. “If there are real supply disruptions, that will be the trigger for significant price increases.”
For now, there is no evidence at the moment that Russia is cutting off oil supplies to the world. And the West has made efforts to rid Russia’s energy industry of sanctions in hopes of minimizing the impact on the market.
Source: Ambito
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