As assaults on Russian infrastructure by Ukraine continue, Brent Crude rises beyond $86
After briefly surpassing $86 per barrel on Monday—its highest level since November—Brent Crude began to decline. This increase coincided with increased Ukrainian assaults on Russian energy infrastructure. At 1333 GMT, the price of a barrel of Brent crude oil futures for May delivery increased by 51 cents to $85.85. Due to the contract’s approaching expiration, the U.S. West Texas Intermediate (WTI) oil contract for April saw a 62-cent gain to $81.66, although in lethargic trade. The May delivery contract, which is traded more often, increased by 60 cents to $81.18.
According to Vandana Hari, creator of Vanda Insights, “the strikes on Russian refineries last week added $2–$3 per barrel of risk premium to crude, which persists as we witness further attacks over the weekend.”
According to a Reuters study, these assaults have prevented around 7% of Russian refining capacity from operating in the first quarter. As a result, market sources predict that Russia will increase its oil exports via western ports by around 200,000 barrels per day (bpd) in March, above the monthly target of 2.15 million bpd.
Morgan Stanley has updated its predictions for Brent oil prices, bringing them up to $90 per barrel for the third quarter of 2024, due to the disruptions caused by Russia and the extended production cutbacks by OPEC+. Last week saw advances in both oil futures, which saw their best levels since November. The International Energy Agency’s continuous improvements to its 2024 demand estimate since November were partially responsible for this spike.
Regarding supply, Iraq said that it will cut its oil shipments in the next months by more than 100,000 barrels per day from the levels it reported last month. This is to make up for any surplus that it may have had in January and February above its OPEC+ quota. Iraq has promised to follow the voluntary cutbacks that were recently extended into the second quarter by the OPEC+ group.
Concerns about inflation are anticipated to keep the US Federal Reserve’s interest rates unchanged.
This week, the focus moves to the major nations’ monetary policy choices, because many central banks have kept interest rates high in an effort to reduce ongoing inflationary pressures. According to IG market analyst Tony Sycamore, the outcome of the U.S. Federal Reserve’s two-day meeting on Wednesday will give insight into when interest rate changes will occur. This month’s rate hike by the Fed is expected to remain unchanged, and there is now a 50/50 likelihood that rates will be lowered at the June meeting. As the world’s biggest oil user, the United States may see an increase in demand due to lower interest rates, which would raise oil prices.
