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Oil in 2nd Weekly Loss, But a Barrel Still Above $100

Commodities Mar 18, 2022 03:12PM ET
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By Barani Krishnan

Investing.com -- Oil prices logged a second weekly loss as the Russia-Ukraine war premium dipped from its highs of two weeks ago. But keeping the market below $100 a barrel appears difficult, with neither side backing down from its tough stance despite being engaged in peace talks.

“Oil will remain a volatile trade in both directions, but the geopolitical risks don’t seem like they will be going away anytime soon, so $100 oil is likely here to stay,” said Ed Moya, head of U.S. research at online trading platform OANDA. He noted that Ukraine President Volodymyr Zelensky seemed determined in making his nation a full EU member while Russian leader Vladimir Putin accused his rival of delaying talks with unrealistic proposals. 

Crude prices reached almost $140 a barrel in the first week of March at the height of geopolitical tensions from the war, and concerns over Western sanctions on Russia that disrupted even energy exports from Moscow — despite the measures being designed to specifically avoid sales of Russian gas, which Europe is highly dependent on. Only the United States has so far banned imports of both Russian oil and gas.

Earlier this week, oil prices fell almost as dramatically as they had risen previously, with U.S. crude reaching below $94 a barrel from a Ukraine-invasion high of $130.50, amid heightened efforts of diplomacy by negotiators and mediators in the conflict. 

By Thursday though, it was clear that such peace overtures weren’t working as well as initially thought, and crude benchmarks sprung back to above $100.

In Friday’s trade, U.S. crude’s West Texas Intermediate, or WTI, benchmark settled up $1.72, or 1.7%, at $104.70 a barrel. For the week, WTI was down 4.2%, after the previous week’s decline of 5.5%.

London-traded Brent, the global benchmark for oil, settled up $1.29, or 1.2%, at $107.93. Brent fell below $97 on Wednesday, compared with a March 7 high of $139.13. Like WTI, it was down 4.2% on the week, following through with the previous week’s drop of 4.6%.

Aside from a war premium, there was also upward pressure on oil prices after the Paris-based International Energy Agency, or IEA, noted in recent days that some 3 million barrels a day of Russian crude production could be shut in from April, due to buyers’ reserve.

Western oil majors, including Shell (LON:RDSa), have said they won't purchase Russian crude any more, while many more buyers are trying to find alternative sources to avoid the risk of violating U.S. sanctions unintentionally. By contrast, India's plans to circumvent Western measures by trading in non-dollar currencies are still at an embryonic stage, analysts said.

But oil prices might still fall from demand destruction as gasoline at near record highs of above $4 a gallon at U.S. pumps discourages drivers in the world’s largest consuming country from filling up their tanks as often as a year ago, when regular automobile fuel was at around $2.50 a gallon.

The IEA, which looks out mostly for oil consuming nations in the West, suggested this week that a shift in consumption — not unlike the Covid-lockdown era — might be what’s needed to bring prices down. 

“Reducing oil demand does not depend only on governments but also citizens and corporations,” Fatih Birol, executive director at the IEA, said. “Measures that they should take would include lowering speed limits, making people work from home, more public transportation and urban car-free days.”

Such measures could quickly cut oil demand by 2.7 million barrels a day, Birol said. Global oil demand stands at around 100.6 million barrels daily, with analysts estimating current shortfall at around 3.0 million to 5.0 million per day.

Oil in 2nd Weekly Loss, But a Barrel Still Above $100
 

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Comments (4)
Casador Del Oso
Casador Del Oso Mar 18, 2022 4:36PM ET
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It could be months before oil tops out. In the meantime get used to paying more for everything.
Ac Tektrader
Ac Tektrader Mar 18, 2022 4:28PM ET
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the Ukrainian bribes to the Russian tank crew worked pretty good now Ukrainians are bribing Russian jet pilots ....at this rate the west won't have to send mig 29s the Ukrainians will get the latest jet fighters directly from the Russian military.....
Ac Tektrader
Ac Tektrader Mar 18, 2022 3:23PM ET
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question Putin and his generals arev hey war criminals thieves liars or just stupid and ignorant. working on an agenda of brutal conquest. they are the enemy of democracy and common decientcy. their actions, war crimes, against Ukraine have created wide spread death and distruction, 1world wide inflation and distroyed the Russian economy. . they need to be held accountable for their crimes against Ukraine. these Russian psychopaths need to be removed and perminentlly jailed.
Alberto Vazquez
Alberto Vazquez Mar 18, 2022 3:23PM ET
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You are definitely BLIND as a rock
Ac Tektrader
Ac Tektrader Mar 18, 2022 3:23PM ET
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Alberto Vazquez Alberto.....is that all you have Russian....pretty pathetic like your Army...
Mark McMillan
Mark McMillan Mar 18, 2022 2:35PM ET
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Volatility will be around for a while. I believe current world events and the ruthlessness of OPEC "mafia the price will remain on the higher end. News will influence the course course but ultimately it seems the the higher prices are going to be around for a while. We live in some weird times. Peace, unity and prosperity to all the fellow readers.
Barani Krishnan
Barani Krishnan Mar 18, 2022 2:35PM ET
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Thanks and best wishes to you ahead of the weekend, Mark.
 
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