🔴 LIVE: The Secrets of ProPicks AI Success Revealed + November’s List FREEWatch Now

Oil surges 8% amid warnings of Russian supply shortages

Published 03/16/2022, 09:04 PM
Updated 03/17/2022, 03:16 PM
© Reuters. Industrial facilities of PCK Raffinerie oil refinery are pictured in Schwedt/Oder, Germany, March 7, 2022. The company receives crude oil from Russia via the 'Friendship' pipeline. REUTERS/Hannibal Hanschke
MS
-
LCO
-
CL
-

By Arathy Somasekhar

HOUSTON (Reuters) -Oil prices climbed 8% on Thursday, extending a series of wild daily swings, as the market rebounded from several days of losses with a renewed focus on supply shortages in coming weeks due to sanctions on Russia.

Oil benchmarks in recent weeks have undergone their most volatile period since mid-2020. After sliding as buyers cashed in on the run-up, prices resurged on expectations that shortages will soon squeeze the energy market.

Benchmark Brent crude futures added $8.62, or 8.79%, at $106.64 a barrel, its largest percentage gain since mid-2020.

U.S. West Texas Intermediate (WTI) crude rose $7.94, or 8.35%, to $102.98 a barrel.

In the last eight trading sessions, Brent oil per barrel has traded as high as $139 and as low as $98 - a more than $40 spread. That has pushed many investors to exit, creating conditions for more wild price swings in the weeks ahead, traders, bankers and analysts said.

Numerous nations have banned purchases of Russian oil to punish Moscow for its invasion of Ukraine nearly three weeks ago. Russia, which calls the military action a "special operation," is the world's biggest exporter of crude oil and fuel products. Refiners and end-users must make quick adjustments for coming weeks.

"There are renewed worries in the market that we could lose some more Russian oil," said John Kilduff, partner at Again Capital LLC.

The International Energy Agency said 3 million barrels per day (bpd) of Russian oil and products could be shut in from next month. That loss would be far greater than an expected drop in demand of 1 million bpd from higher fuel prices, the IEA said.

Russian Deputy Prime Minister Alexander Novak said energy supplies from Russia would remain stable despite what he described as the tense geopolitical situation, the Interfax news agency reported.

Morgan Stanley (NYSE:MS) raised its Brent price forecast by $20 for the third quarter to $120 a barrel, predicting a fall in Russian production of about 1 million bpd from April.

The bank noted that loadings continue at Russian ports, but the share with "destination unknown" is rising. More Russian tankers are on the water as these exports are "starting to struggle to find a market," it added.

The supply squeeze will more than offset a downward global demand revision of about 600,000 bpd, the bank said.

Prices were being held back by worries about demand after a surge in coronavirus cases in China.

"It's a one-two punch... demand side is increasingly becoming a question mark," Kilduff added.

On Wednesday, prices sagged after government data showed U.S. crude inventories climbed 4.3 million barrels last week, contrary to analysts' expectations for a 1.4 million barrel decline.

© Reuters. Industrial facilities of PCK Raffinerie oil refinery are pictured in Schwedt/Oder, Germany, March 7, 2022. The company receives crude oil from Russia via the 'Friendship' pipeline. REUTERS/Hannibal Hanschke

The oil market largely shrugged off the U.S. Federal Reserve's expected interest rate hike of one-quarter of a percentage point on Wednesday.

Sentiment brightened after China pledged policies to boost financial markets and economic growth, while a decline in new COVID-19 cases there spurred hopes lockdowns will be lifted and factories will resume production.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.