WTI crude oil futures are swinging between potential gains and losses today, oscillating around $114 per barrel. We saw a 5% price increase in the previous session.
Elevated volatility could also characterize the oil market in the days and weeks ahead. The main factor influencing the situation and prices here seems to be Russia's attack on Ukraine. US President Joe Biden is scheduled to meet with NATO allies and announce additional sanctions against Russia.
Gas from the USA for Europe, but oil still from Russia?
As Bloomberg reported, Jake Sullivan, the U.S. national security adviser, said an agreement between the European Union and the U.S. on natural gas supplies could be announced as early as Friday. The Old Continent could thus take another step toward independence from Russian gas supplies, but a European embargo on oil from Russia seems unlikely today.
On the oil market, investors are taking into account not only the war in Ukraine, but also: progress in talks on a nuclear agreement with Iran, the stoppage of operations at the Caspian Pipeline Consortium's terminal in Kazakhstan due to storm damage, the severe coronavirus outbreak in China, dwindling crude stocks in the U.S., and even earlier rebel attacks on Saudi oil infrastructure.
According to the IEA, the prospect of oil production disruptions in Russia may still be present. This, in turn, could threaten a large-scale global supply shock. The IEA estimates in its March report that production of 3 million barrels per day (mb/d) of Russian oil could be halted from April as sanctions take effect and buyers avoid exports.
IEA: oil demand lower by 1.3 million barrels per day
OPEC+ is sticking to its agreement of gradual, but relatively small relative to demand, supply increases for now. Only Saudi Arabia and the United Arab Emirates have significant spare capacity that could immediately help offset the Russian deficit.
As a result, the IEA has lowered its forecast for global oil demand by 1.3 mb/d over the Q2 2022-Q4 2022 period. This represents slower growth of 950,000 barrels per day on average in 2022. Total demand is now forecast at 99.7 mb/d in 2022, which translates into a 2.1 mb/d increase over 2021, the report said.
Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Forex service)
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