TIMES.KY

Cayman Islands, Caribbeanand International News
Tuesday, Mar 28, 2023

Oil marches higher with sights on $114 a barrel

Oil marches higher with sights on $114 a barrel

Russia invaded Ukraine and the West responded with numerous sanctions designed to hammer Russia’s economy.
Oil relentlessly marched higher beyond $110 a barrel on Wednesday, responding to a flood of divestment from Russian oil assets by major companies and expectations that the market will remain short on supply for months to come.

The market’s surge has been dramatic, with global benchmark Brent crude gaining 11 percent this week alone after Russia invaded Ukraine and the West responded with numerous sanctions designed to hammer Russia’s economy.

While the energy sector was not specifically targeted, the sanctions, which have targeted financial transactions and banks, have hampered exporting capabilities from Russia, which ships 4 million to 5 million barrels of oil worldwide every day, more than any nation except Saudi Arabia.

“The sanctions on individuals and financial institutions have led the oil industry and other government entities to a de facto ban on Russian oil purchases,” said Andrew Lipow, president of Lipow Oil Associates in Houston, Texas in the United States.

Global benchmarks were off earlier highs after Brent hit its highest level since 2014 while US crude surged to a peak not seen since 2011.

Brent crude futures peaked at $113.94 a barrel before easing to $110.58 by 1:07pm EST (17:07 GMT), up $5.61 or 5.3 percent. US West Texas Intermediate (WTI) crude futures hit a high of $112.51 a barrel, and were last up $5.05, or 4.9 percent, to $108.46.

Both benchmarks pulled back after US Federal Reserve Chair Jerome Powell said the US central bank would boost interest rates several times to quell inflation.

“Demand destruction – through still higher prices – is now likely the only sufficient rebalancing mechanism,” said Goldman Sachs analysts in a note.

Relief in the form of more supply is unlikely in the near term. The Organization of the Petroleum Exporting Countries and allies – which include Russia – stuck to its long-term plan to boost output by just 400,000 barrels per day (bpd) at a brief meeting on Wednesday.

Even as OPEC+ has increased output for the last several months, producers are routinely falling short of their targets, widening a gap that can only be filled by dipping into stockpiles.

Current worldwide demand has roughly reached levels last seen before the coronavirus pandemic, and there is inadequate supply, causing large countries to dip into their stockpiles to make up for the shortfall.

Refiners and other buyers of oil are scrambling. Prominent grades of crude oil traded worldwide, such as those in the North Sea and the Middle East, are at record premiums above Brent.

At the same time, the key Russian Urals grade is being discounted at $18 lower than the benchmark – and prospective sellers are still finding little interest in Russian oil. On Wednesday, Russia’s Surgutneftegas was unable to sell 880,000 tonnes of Urals oil from Russian ports, following cancellations of other proposed sales.

Adding fuel to the fire, the White House on Wednesday said it was “very open” to the possibility of targeting Russian oil and gas with sanctions. That could drive prices even higher, analysts said, until consumers start to balk at the rising costs.

However, National Economic Council Deputy Director Bharat Ramamurti later on Wednesday said the US administration does not want to target the Russian energy sector for now.

Russian oil exports account for about 8 percent of global supply.

Trade in Russian oil was already in disarray as producers postponed sales, importers rejected Russian ships and buyers worldwide searched elsewhere for crude while Western sanctions and pullouts by private companies squeezed Russia.

Numerous global oil majors announced plans to divest of their Russian investments, including ExxonMobil, BP and Shell. On Wednesday, merchant trader Trafigura said it had frozen its investments in Russia, one day after Exxon said it would exit Russian oil-and-gas operations.

US oil inventories continued to decline, meanwhile. The key Cushing, Oklahoma crude hub’s tanks are at their lowest since 2018, while the US strategic reserves dropped to a near 20-year low – and that was before another release announced by the White House on Tuesday in tandem with other industrialised nations.

That release of 60 million barrels of oil agreed on Tuesday by International Energy Agency member countries failed to reassure the market, as prices rose after the announcement.

“Given the 100 million bpd oil demand market, 60 million barrels satiates slightly over half a day of demand … and barely gets the market past lunchtime,” wrote RBC Capital Markets analyst Michael Tran.
Newsletter

Related Articles

TIMES.KY
Close
0:00
0:00
AOC explains why she opposes banning TikTok
UK: Humza Yousaf replaces Nicola Sturgeon as SNP leader and first minister in Scotland
In a dramatic U-turn against His Government: Judicial Reform Legislation Must Be Halted, Says Israeli Defense Minister Yoav Gallant
Gordon Moore, a co-founder of Intel Corporation, died at 94
Powell: Silicon Valley Bank was an 'outlier'
Donald Trump arrested – Twitter goes wild with doctored pictures
NYPD is setting up barricades outside Manhattan Criminal Court ahead of Trump arrest.
Credit Suisse's Scandalous History Resulted in an Obvious Collapse - It's time for regulators who fail to do their job to be held accountable and serve as an example by being behind bars.
Home Secretary Suella Braverman tours potential migrant housing in Rwanda as asylum deal remains mired in legal challenges
Paris Rioting vs Macron anti democratic law
'Sexual Fantasy' Assignment At US School Outrages Parents
Credit Suisse to borrow $54 billion from Swiss central bank
Russian Hackers Preparing New Cyber Assault Against Ukraine
Jeremy Hunt insists his Budget will get young parents and over-50s back into work
If this was in Tehran, Moscow or Hong Kong
TRUMP: "Standing before you today, I am the only candidate who can make this promise: I will prevent World War III."
Mexican President Claims Mexico is Safer than the U.S.
A brief banking situation report
Lady bites police officer and gets instantly reaction
We are witnessing widespread bank fails and the president just gave a 5 min speech then walked off camera.
Donald Trump's asked by Tucker Carlson question on if the U.S. should support regime change in Russia?.
Silicon Valley Bank exec was Lehman Brothers CFO
In a potential last-ditch effort, HSBC is considering a rescue deal to save Silicon Valley Bank UK from insolvency
BBC Director General, Tim Davie, has apologized, but not resigned, yet, following the disruption of sports programmes over the weekend
Elon Musk Is Planning To Build A Town In Texas For His Employees
The Silicon Valley Bank’s collapse effect is spreading around the world, affecting startup companies across the globe
City officials in Berlin announced on Thursday that all swimmers at public pools will soon be allowed to swim topless
Fitness scam
Market Chaos as USDC Loses Peg to USD after $3.3 Billion Reserves Held by Silicon Valley Bank Closed.
Senator Tom Cotton: If the Mexican Government Won’t Stop Cartels from Killing Americans, Then U.S. Government Should
Banking regulators close SVB, the largest bank failure since the financial crisis
The unelected UK Prime Minister Rishi Sunak, an immigrant himself, defends new controversial crackdown on illegal migration
Man’s penis amputated by mistake after he’s wrongly diagnosed with a tumour
In a major snub to Downing Street's Silicon Valley dreams, UK chip giant Arm has dealt a serious blow to the government's economic strategy by opting for a US listing
It's the question on everyone's lips: could a four-day workweek be the future of employment?
Is Gold the Ultimate Safe Haven Asset in Times of Uncertainty?
Spain officials quit over trains that were too wide for tunnels...
Don Lemon, a CNN anchor, has provided a list of five areas that he believes the black community needs to address.
Hello. Here is our news digest from London.
Corruption and Influence Buying Uncovered in International Mainstream Media: Investigation Reveals Growing Disinformation Mercenaries
Givenchy Store in New York Robbed of $50,000 in Merchandise
European MP Clare Daly condemns US attack on Nord Stream
Former U.S. President Carter will spend his remaining time at home and receive hospice care instead of medication
Tucker Carlson called Trump a 'demonic force'
US Joins 15 NATO Nations in Largest Space Data Collection Initiative in History
White House: No ETs over the United States
U.S. Jet Shoots Down Flying Object Over Canada
Being a Tiktoker might be expensive…
SpaceX, the private space exploration company, made a significant breakthrough in their mission to reach space.
China's top tech firms, including Alibaba, Tencent, Baidu, NetEase, and JD.com, are developing their own versions of Open AI's AI-powered chatbot, ChatGPT
×