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Oil Back Above $100 as West Mulls More Russia Sanctions, Saudis Hike Selling Price

Commodities Apr 04, 2022 03:07PM ET
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By Barani Krishnan

Investing.com -- From more Western sanctions planned for Russia to a hike in Saudi selling prices, oil markets found enough motivation to rebound from last week’s worst selloff in two years to put U.S. crude back above $100 per barrel on Monday.

Mounting civilian deaths in Ukraine increased pressure on European countries to impose sanctions on Russia's energy sector, prompting new concerns from market participants around tighter supply.

Saudi Aramco (SE:2222), meanwhile, raised its official selling prices for crude to be sold to all destinations in May, as Riyadh and its state oil firm continued milking the current oil crisis for what it’s worth.

London-traded Brent, the global oil benchmark, settled up $3.14, or 3%, at $107.53 per barrel, after a session high at $108.54. Brent fell 13% last week for its biggest weekly decline since April 2020. Even so, it finished the first quarter up 39%.

New York-traded U.S. crude benchmark West Texas Intermediate, or WTI, settled up $4.04, or 4%, at $103.28 a barrel, after an intraday high of $103.69. WTI settled below the key $100 support last week as it fell about 13% just like Brent for its worst week since April 2020. It, however, settled the first quarter up 33%.

Brent and WTI were down more than 1% each earlier in the session when they reopened from last week’s tumble on news that the United Nations has brokered a first-ever two-month truce between a Saudi-led coalition and Iran-aligned Houthis in the seven-year war over Yemen.

Last week’s selloff was triggered by President Joe Biden’s announcement that the United States will release up to 1 million barrels daily from its Strategic Petroleum Reserve for six months beginning May. The release, the third in the past six months, will serve as a bridge until domestic producers can boost output and bring supply back into balance with demand, Biden said.

Also weighing on oil last week were demand concerns in China, the world's top oil importer, where the most populous city, Shanghai, remained in a Covid-19 lockdown. China's transport ministry said it expects a 20% drop in road traffic and a 55% fall in flights during the three-day Qingming holiday due to a flare-up of coronavirus cases in the country.

Despite the Yemen peace pact, U.S. reserves release and China demand concerns, crude prices rebounded Monday as tight supply concerns returned to the fore, analysts said.

This was in spite of a report by Quantum Commodity Intelligence that the Paris-based International Energy Agency is likely to release 120 million barrels from the reserves of its non-U.S. members to add to the 180 million barrels announced by the Biden administration.

If the IEA release is staggered over six months as well, that would be almost 667,000 barrels per day on top of the 1.0 million from the U.S. SPR -- equating for four month's worth of recent OPEC increments.

The reserves release will “create distortions in a market that is already facing tremendous challenges,” and make oil buyers pay more in the future, said Phil Flynn, analyst at Chicago-based broker Price Futures Group.

“If you look at the back end of the oil curve what seems to be happening is that the market is predicting that this is going to have a short-term impact on price,” said Flynn. “We have seen people roll out of the front end of the oil curve and get long contracts like December 2022, December 2023, and December of 2024 while abandoning the front end of the curve.”

Oil Back Above $100 as West Mulls More Russia Sanctions, Saudis Hike Selling Price
 

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Comments (7)
Todd Gray
Todd Gray Apr 04, 2022 8:21PM ET
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Liberal policy; punish the entire world, just to hurt Vladimir Putin, and a few dozen Russians. No worthwhile democratic leadership would do, that!
Barani Krishnan
Barani Krishnan Apr 04, 2022 8:21PM ET
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Communist policy: Destroy the world for the sake of the motherland. Wow! You love that, don't you Todd?
Tom Sc
Tom Sc Apr 04, 2022 8:21PM ET
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but I dont get with u people, dont Republicans want to go to war with Putin now? I know, u want whatever Biden isnt doing. What about the Repulicans that love dictators, what do they want? you know, the freedom loving Republicans that want dictators for everyone else for some reason. I'm no fan of Biden or politicians in general but the Repulican party has become a bizarre case study.
Syed Ali
Syed Ali Apr 04, 2022 6:57PM ET
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a lame reason to touch the top again
Flat Top
Flat Top Apr 04, 2022 6:51PM ET
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Biden tried some crazy thing last week. It didn’t work. I am frankly embarrassed to call this man my president
Tom Sc
Tom Sc Apr 04, 2022 6:51PM ET
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let me guess, u were proud to call Trump your president?
Flat Top
Flat Top Apr 04, 2022 6:51PM ET
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Tom Sc very proud.
Todd Gray
Todd Gray Apr 04, 2022 6:51PM ET
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Me too. But, I don't think he cares. He worked out his deals before the election. Now, we all pay, for his few million.
Tom Sc
Tom Sc Apr 04, 2022 6:51PM ET
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lol a one term president who manages to lose the House and Senate is definitely someone you want to get behind. I guess he just got so tired of winning that he decided to lose everything to mix things up a bit?
Daniel Torres
Daniel Torres Apr 04, 2022 6:21PM ET
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You know you aint got no friends in the Saudi's. We should just ramp up production in US from all angles and make these middle eastern countries poor. They can then use their robes as sleeping mats.
Tom Sc
Tom Sc Apr 04, 2022 6:21PM ET
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it has been done before and many investors and companies went BK. this is what many people do not understand, why shale oil companies are so hesitant to increase production, because it's so capital intensive and leaves them very exposed when the price drops. and that's what the Saudis do.....if US ramps up production they will flood the market and decimate US producers.
Fluid Capital Investments
Fluid Capital Investments Apr 04, 2022 3:26PM ET
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oxy should hot 61 by Wends
John Doe
ForexInsiders Apr 04, 2022 3:16PM ET
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Short Squeeze if traded.
jason xx
jason xx Apr 04, 2022 2:20PM ET
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Less demand in China should be good? more supply
Barani Krishnan
Barani Krishnan Apr 04, 2022 2:20PM ET
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Logically, yes.
John Doe
ForexInsiders Apr 04, 2022 2:20PM ET
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Logically that will drop price, not raise it based on S&D principles. This ensuing rally based on said principles is the order fill of big shorters getting filled by smaller money buys. Remember, every sell order has to have a buy order, there has to be "winners AND losers". China confirming less demand is creating a sellers mindset, but you cant forget to wait for those shorts to fill before hopping on.
 
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