Crude oil prices stabilized on Friday and were on course to post their worst weekly declines since November, after swinging back and forth between worries of growing sanctions against Russian oil and attempts to bring more supply to market from other key suppliers.
Brent oil futures were down 16 cents, or 0.15 percent, to $109.17 a barrel at 0434 GMT, after a 1.6 percent decline in the previous trading session.
Following a 2.5 percent loss on Thursday, West Texas Intermediate (WTI) crude futures were up 2 cents, or 0.02 percent, to $106.04 a barrel on Friday.
Having achieved a 14-year high of $139.13 earlier in the week, Brent was on course for a weekly loss of almost 7 percent following a week highlighted by rumors of Russian oil embargoes, then probable supply increases from Iran, Venezuela, and the United Arab Emirates, all while violence in Ukraine worsened. After reaching a high of $130.50, crude oil in the United States was destined for a decrease of almost 8%.
“Both futures may easily move significantly below $100 a barrel from here on any news believed to be alleviating supply interruptions,” said Jeffrey Halley, an analyst at OANDA. “Both contracts could well move dramatically below $100 a barrel from here on any news perceived to be easing supply disruptions.”
Similarly, if there are any unfavorable headlines, he believes that both contracts might quickly return to $115.00 or higher.
“It’s simply the kind of market that exists.”
Crude oil prices fell this week when it became evident that the European Union, which is highly dependent on Russian energy, will not join the United States and the United Kingdom in banning Russian oil.
Russia, the world’s second-largest oil exporter after Saudi Arabia, supplies around 3 million barrels of petroleum per day to the OECD nations, according to the International Energy Agency.
Given that Russia is a member of the Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, it is unlikely that additional output from members of the grouping will be sufficient to close supply gaps in the near term, according to Commonwealth Bank analyst Vivek Dhar.
“They’re very much connected together politically because of the framework,” he said.
Also, complicating matters is the fact that several OPEC+ producers, including Angola and Nigeria, have failed to fulfill their production quotas, thus restricting the group’s capacity to compensate for Russian supply disruptions.
According to the Commonwealth Bank, the price of Brent oil will average $110 in the second and third quarters of this year, but it might rise as high as $150 in the near term.
“It’s all extremely up in the air right now.” “It’s been quite tough to come up with a position,” Dhar said.