Oil prices rise amid worsening Russia-Ukraine conflict and Libya supply disruption

18 April, 2022
Oil prices rise amid worsening Russia-Ukraine conflict and Libya supply disruption
Oil prices rose on Monday amid growing supply concerns as Libya halted production from one of its fields and the worsening Russia-Ukraine conflict increased the likelihood of stiffer western sanctions on exports from Moscow.

Brent, the global benchmark for two thirds of the world's oil, rose 0.90 per cent to $112.70 a barrel at 9.03am UAE time. West Texas Intermediate, the gauge that tracks US crude, climbed 0.87 per cent to $107.90 a barrel.

Both gauges are rallying on from Thursday when Brent gained 2.68 per cent and WTI surged 2.59 per cent, to their first weekly gain this month.

Libya’s National Oil Corporation shut down its El Feel oilfield in the south-west of the country after people entered on Saturday and prevented employees from working, it said in a statement on Sunday. The company said it was forced to declare force majeure – an unforeseen set of circumstances preventing a party from fulfilling a contract – at the field, also known as the Elephant.

“Protesters appear to have shut down one small Libyan oil field and completely disrupted loading at a major coastal terminal. Although only 75,000 bpd [barrels per day] of actual production has been taken offline, with global supplies now so tight, even the most minor disruption is likely to have an outsized impact on prices,” said Jeffrey Halley, senior market analyst, Asia Pacific at Oanda.

The worsening situation in Ukraine, with Russia bombarding several cities and talks between Kyiv and Moscow at a dead end, have also raised the prospects of tougher sanctions on Russian energy exports in an already tight market.

Reports before the Easter holidays suggested that the EU was considering plans to cut Russian oil imports in a phased manner to give Germany and others time to line up alternative suppliers for their energy needs.

Supply has also been affected as some Opec countries struggle to hit production quotas.

Total Opec crude production averaged 28.56 million bpd in March, up 57,000 bpd from the previous month. Output increased mainly in Saudi Arabia, Kuwait and the UAE, while production declined in Libya, Nigeria and Congo, Opec data based on secondary sources revealed.

“There are a few reasons behind today’s rise. Opec reported that production rose only 57,000 barrels per day in March according to data, not even climbing by the agreed 253,000 bpd,” Mr Halley said.

“The Russian Interfax agency said Russian production slipped by 7.5 per cent in the first half of March.”

Russia's oil supply is expected to decline further as sanctions by the US and its allies due to the Ukraine conflict take effect, the International Energy Agency (IEA) says. About 1.5 million bpd of production is expected to be offline in April, the agency said.

From May, close to 3 million bpd of Russian production could be shut in due to international sanctions and as a widening customer-driven embargo comes into full force, the IEA said last week.

Russia is the world's second-largest energy exporter and accounts for about 10 per cent of global energy output, including 17 per cent of its natural gas and 12 per cent of its oil. The US and UK have already banned Russian oil imports.

The oil market has remained tumultuous since Russia’s war in Ukraine started in late February. Brent price, which rose 67 per cent last year, climbed to a notch under $140 per barrel in March. It fell briefly under the $100 per barrel mark after a co-ordinated release of record oil inventories by the IEA and the US from emergency stockpiles, but recovered quickly.

Brent is still more than 40 per cent higher since the start of this year.

“With so much volatility in intraday oil prices, and extreme reactions to headline risks, technical levels have become rather irrelevant,” Mr Halley said.

“I continue to expect that Brent will remain in a choppy $100 to $120 range, with WTI in a $95 to $115 range. Brent crude has further support at $96 and WTI at $93 a barrel.”

Gold prices also gained on Monday to their highest level since mid-March as the Ukraine crisis boosted its safe haven demand. Spot gold was up 0.75 per cent at $1,988.8 an ounce at 10.32am UAE time.

The rise on Monday comes after a second straight weekly gain for gold. 
Source: www.thenationalnews.com
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