Daily Times

Crude oil futures retreated on a week-on-week (WoW) basis for the first time since December, snapping a eight-week winning streak.

Though Brent, the international benchmark for two-thirds of the world’s oil, and West Texas Intermediate (WTI), the main oil benchmark for North America, edged lower by $0.90 to $93.54 and $2.03 to $91.07, respectively, on WoW basis; Brent rallied 38.06 percent, from $69.88 to $96.48, and WTI jumped 44.1 percent, from $66.26 to $95.48, during the last 9 weeks.

However, major oil benchmarks of Opec+, including Opec Basket, Arab Light and Russian Sokol, are still keeping the bullish bias intact and closed the ninth straight week on a positive note. The price for Opec Basket surged to $95.32 from $92.87 on a week-on-week basis, showing an increase of 2.63 percent. Similarly, Arab Light price went up 0.46 percent to $91.50 from $91.08 a barrel and the price of Russian Sokol surged 1.92 percent to $94.33 from $92.55 on WoW basis. Due to tighter supply, rising demand, and output limitations, oil costs amplified to hit their maximum levels ever since 2014. In the previous eight weeks, the global crude oil prices surged up to 1.25 percent, 6.34pc, 2.43pc, 2.13pc, 5.27pc, 8.85pc, 2.15pc and 4.13pc, respectively.

Despite uncertainties brought by Omicron dissipating in early December, relative market tightness and low inventories kept the prices on an upward trajectory, setting stage for Russia-Ukraine tension to jack up them to eight-year highs.

As tensions between Russia and Ukraine are far from over, so does the risk that it spills over into global commodity markets. Keeping this factor in view, crude oil prices in Russia and the Gulf region are soaring. With much of Europe captivated by the prolonged Russia-Ukraine standoff, speculation that Russian oil might be embargoed from the market added another geopolitical premium to prices.

Apart from the Russia-Ukraine issue, Paris-based International Energy Agency (IEA) also rattled energy markets by warning that global oil supplies might be dangerously short of demand. The IEA in a monthly report lifted its forecast for global oil demand in 2022 by 800,000 barrels a day to 3.2 million barrels. The report estimated there could be a billion barrels shortfall by the end of last year between what the Organization of the Petroleum Exporting Countries and its allies – known as Opec+ – were supposed to have pumped versus actual deliveries to the market since the start of 2021.

The oil markets have also been taking comfort from a boost in demand optimism. Simultaneously, supply scarcity remains a global worry as the Opec+ is not willing to increase output more than it is supposed to do under the terms of its agreement. The group began to increase output last year, renewing every month a target of 400,000 barrels per day, as demand and prices recovered after countries began to lift Covid restrictions.

However, crude oil prices slipped recently amid reports about the expected US-Iran nuclear deal. The oil prices are slipping on the prospect of more than a million barrels of Iranian crude re-entering the market. However, they warned that in the absence of a deal, triple-figure oil prices are not out of question.