OIL SURGES ABOUT 4% AS WAR RAISES SUPPLY CONCERNS

NEW DELHI: Crude oil prices surged around 4% on Monday as the conflict between Russia and Ukraine continued and concerns over tightening supplies persisted.

The latest spike in prices was triggered after Ukraine’s deputy prime minister Iryna Vereshchuk reiterated the country’s stand that there would be can be no talk about surrender and laying down weapons, which raised concerns of a prolonged conflict, analysts said.

The International Energy Agency’s (IEA) estimate that three million barrels per day (mbpd) of Russian oil and products could be curtailed from next month raised prices, noted Rahul Kalantri, vice-president, commodities, Mehta Equities.

A delay in the US-Iran deal and supply concerns from Russia could support crude oil prices at lower levels, he said.

In its oil market report for March 2022 released last week, IEA said that

“The prospect of large-scale disruptions to Russian oil production is threatening to create a global oil supply shock. We estimate that from April, 3 mbpd of Russian oil output could be shut in as sanctions take hold and buyers shun exports. The Organization of the Petroleum Exporting Countries (OPEC)+ grouping is, for now, sticking to its agreement to increase supply by modest monthly amounts,” IEA said in its oil market report for March 2022 released last week. Only Saudi Arabia and the UAE hold substantial spare capacity that could help offset a Russian shortfall, it said.

At the time of writing the story, the May contract of Brent on the Intercontinental Exchange was trading at $112.10, higher by 3.86% from its previous close, according to data on Bloomberg. The April contract of West Texas Intermediate on the NYMEX rose 4.07% to $108.96 per barrel.

Brent touched $139.13 per barrel, the highest since 2008, on March 7. Prices started easing on March 9, after UAE said it was in favour of higher production by OPEC.