Oil prices The world fell after a day of turmoil yesterday, Thursday (10/3). Price drop driven by President’s promise Russia Vladimir Putin to fulfill contractual obligations to deliver supplies oil in the midst of his military invasion of Ukraine.
Brent crude futures for May delivery were pegged at US$109.33 per barrel, down 1.6 percent. Early in the trading session, Brent had jumped 6.5 percent.
Later, U.S. West Texas Intermediate (WTI) crude futures for April delivery fell 2.5 percent to $106.02 a barrel.
Since Russia’s military invasion of Ukraine, the oil market has been the most volatile. Brent crude oil prices had penetrated US $ 139 per barrel, the highest level in 14 years. However, prices have shrunk again, even posting their biggest daily decline since April 2020.
“I think some (Russia-Ukraine) war jitters are going to come off the market. People are starting to ask if there’s too much of a supply problem?” said Partner at Again Capital New York John Kilduff.
Russian President Vladimir Putin responded by insisting he would continue to fulfill his contractual obligations for oil supplies. This is good news, given that Russia is a major energy producer that supplies a third of Europe’s gas and 7 percent of global oil supplies.
The problem is that Russian crude is being shunned, in line with the sanctions imposed by the US and western countries for the military invasion of Ukraine. In addition, many market participants are unsure and still question where the replacement supply will come from.
Plus, United Arab Emirates (UAE) officials are sending conflicting signals. The UAE said it would encourage the Organization of the Petroleum Exporting Countries (OPEC) to push production higher. The statement added to the volatility of oil prices, rather than calmed the market.
It is known, OPEC is committed to increasing production by only 400 thousand barrels per day (bpd) every month. The UAE and Saudi Arabia will have no problem as they still have spare capacity, but several other producers in OPEC+ are struggling to meet production targets due to a lack of infrastructure investment in recent years.
Meanwhile, the US is taking steps to relax sanctions on Venezuelan oil and is considering sealing a nuclear deal with Iran that could potentially increase oil supplies.
“With good will, coordination and luck, supply shocks can be greatly mitigated, but may not be neutralized,” said PVM oil market analyst Tamas Varga.
In response, traders denied that the oil rally was over. According to traders, oil prices fell recently because some market participants took profit-taking. They reveal that oil prices have climbed more than 15 percent since Russia’s military invasion of Ukraine.
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