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Oil Spikes as Kremlin Casts Doubt on Ukranian Peace

Oil Spikes as Kremlin Casts Doubt on Ukranian Peace

With the Kremlin casting doubt on the future of ongoing peace negotiations with Ukraine, oil prices rose over $100 a barrel for the first time since December, as investors considered the lack of Russian barrels in a tight market.

Futures in New York settled at $102.98, an increase of 8.4 percent from the previous day. Markets rose when a Kremlin official said that a story claiming significant progress in discussions over Ukraine was “false,” but that the debate would still go through as planned. Due to the conflict, Russian oil shipments have been badly hampered, and the International Energy Agency has forecast that production from the crucial OPEC+ member would decrease by almost a quarter by the end of April. Three cargoes were omitted from Russia’s scheduled March loadings due to unforeseen circumstances.

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The global benchmark Brent crude oil finished over $106 a barrel, with intraday swings of more than $5 for 16 straight sessions — the longest such stretch in history.

According to Morgan Stanley analysts Martijn Rats and Amy Sergeant in a note, “to say that oil prices have been volatile lately would be an understatement.” The analysts raised their projection for third-quarter Brent prices by $20 to $120 a barrel. “It is anticipated that Russia will find it more difficult to sustain its seaborne exports during the coming months.”

In addition, investors are keeping an eye out for a viral recurrence in China. Traffic congestion levels in partly closed-down Shanghai are more than a third lower than they were a year ago, and there are also limits on mobility in the industrial center of Shenzhen and in the province of Jilin, according to official data.

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As a result of the rapid developments in the Ukraine conflict and the sanctions that have followed against Russia, the stock market has seen massive swings, and holdings in oil futures have plummeted as a result of the volatility. Libya stated on Wednesday that OPEC should increase supplies more quickly in order to alleviate the oil situation. Saudi Arabia’s Crown Prince Mohammed bin Salman informed Japanese Prime Minister Shinzo Abe on Thursday that the kingdom is committed to maintaining the balance and stability of the global oil market, according to state-run news agency SPA.

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Prices:

  • In New York, the West Texas Intermediate for April delivery increased $7.94 to close at $102.98 a barrel, up from $102.98 the previous day.
  • Brent for May settlement rose $8.62 to close at $106.64 a barrel, up from $106.64 the previous day.

A lack of liquidity in the oil market is contributing to the market’s volatility, making prices subject to large fluctuations. The degree to which the liquidation has taken place is reflected in open interest data. WTI holdings dipped to their lowest levels since 2016, while Brent holdings fell to their lowest levels since 2015.

1 Comment

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    June 23, 2022

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