The black liquid rebounded at the start of the London trading session on Wednesday from sharp losses in the previous session. This is as concerns about tighter supplies from Russia and Libya dominated the news airwaves, while industry data showed a drop in U.S. crude inventories last week.
The global benchmark, the Brent crude futures is bullish by 1.12%, currently trading $108.45 a barrel, while the United States benchmark, the West Texas Intermediate (WTI) crude futures is also bullish by 1.12%, currently trading $103.20 a barrel.
Both benchmarks fell by 5.2% in volatile trading on Tuesday after the International Monetary Fund (IMF) on Tuesday slashed its forecast for global growth by nearly a full percentage point, citing the economic impacts of Russia’s war in Ukraine and warning that inflation was now a “clear and present danger” for many countries.
What you should know
- Global oil prices have been volatile since the start of the war and it has been pulled higher as a result of tighter supply outlook following sanctions on Russia, the world’s second-largest oil exporter and a key European supplier, after its invasion of Ukraine, which Russia still calls a “special operation.”
- However, despite the ongoing war, a softer global economic outlook and ongoing COVID-19 lockdowns in China, that have reduced demand for oil which is also in turn, weighing on prices.
- OPEC+ monthly report revealed that on the supply side, the Organization of Petroleum Exporting Countries and its allies (OPEC+), produced 1.45 million barrels per day (bpd) below its production targets in March, as Russian output began to decline following sanctions imposed by the West.
- Russia produced about 300,000 bpd below its target in March at 10.018 million bpd, based on secondary sources, the report showed.
- Other outages added to the concerns about supply. Libya’s National Oil Corporation declared force majeure at the Brega oil port on Tuesday, saying it was unable to fulfil its commitments towards the oil market.
- In the United States, crude stocks fell 4.5 million barrels last week, according to market sources citing American Petroleum Institute (API) figures on Tuesday, against expectations of an increase in inventories.
Warren Patterson, ING’s head of commodities strategy based in Singapore stated, “The sell-off yesterday on the back of the IMF revisions was probably overdone. I believe that risks are still skewed to the upside, with the potential for further disruptions from Libya, but more importantly, the potential for an EU ban on Russian oil.”
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