Crude oil futures posted modest weekly gains on supply concerns due to Russia’s military offensive in Ukraine and the growing possibility of European sanctions on Moscow’s energy exports. Oil prices notched a weekly gain of around 0.46 percent after posting a weekly loss of nearly 5 percent in the preceding week after weaker global growth, higher interest rates and Covid-19 lockdowns in China hurt demand.
Brent, the international benchmark for two-thirds of the world’s oil, jumped by $0.49 (+0.46 percent) to $107.14 from $106.65 on a week-on-week (WoW) basis. The West Texas Intermediate (WTI), the main oil benchmark for North America, went up by $2.62 a barrel (+2.57 percent) to $104.69 from $102.07 on a weekly basis. Both Brent and WTI rose for the week and posted their fifth straight monthly gain, with Brent ending the month 1.3 percent higher and WTI surging 4.4 percent during the period.
The price for Opec Basket decreased marginally from $108.81 to $105.33 on a week-on-week basis, showing a decrease of $3.48 (-3.2 percent). The OPEC Reference Basket of Crudes (ORB) is made up of Saharan Blend, Girassol, Djeno, Zafiro, Rabi Light, Iran Heavy, Basra Light, Kuwait Export, Es Sider, Bonny Light, Arab Light, Murban and Merey. The price of Russian Sokol slipped by $2.15 (-2.2 percent) to $95.84 from $97.99 on WoW basis. Similarly, Arab Light prices witessed a decrease of $2.03 (+1.8 percent) to reach $110.57 from $112.60 a barrel on a weekly basis.
There is an increased possibility of Germany joining other EU nations in imposing sanctions on Russian oil exports as Moscow’s military offensive in Ukraine continues. Germany’s Economy Minister Robert Habeck has said the country can cope with an EU embargo on Russian oil imports. Europe’s biggest economy is hoping to find alternative sources of supply soon.
The EU’s move to consider sanctions on Russian imports comes after Russia halted natural gas supplies to Poland and Bulgaria last week. The bloc has accused Russia of weaponising its energy supply. Russia is the world’s second-largest energy exporter. It accounts for about 10 percent of the world’s energy output, including 17 percent of its natural gas and 12 percent of its oil. The US and UK have already banned Russian oil imports. From May onwards, close to 3 million barrels per day of Russian production could be offline due to international sanctions and the widening of customer-driven embargo comes into full force, according to the International Energy Agency (IEA).
Oil prices declined in recent weeks amid concerns about the demand outlook and coordinated efforts by the US and the International Energy Agency to improve supply. Crude prices, which rose close to $140 a barrel in March on developments related to the Ukraine conflict, have given up most gains. However, Europe’s sudden scramble for alternative energy supplies will offset China’s slowdown fears and send prices higher. China, the world’s biggest oil importer, has introduced strict movement curbs in major cities as part of its “zero-Covid” strategy.