Oil rises on Russian production cuts & OPEC’s supply warning

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Highlights

  • Crude oil prices rose on Wednesday.
  • Russian condensate production tumbled below 10Mbpd to reach the lowest level since July 2020.
  • On Tuesday, OPEC lowered its Russian liquid production forecast by 530,000bpd for 2022.

Crude oil prices rose on Tuesday following the ease of lockdown situation in China's Shanghai, lower production of Russian gas condensate, and OPEC's warning related to potential supply losses.

The current jump in oil prices is associated with a warning issued by the OPEC stating that it is impossible to replace some 7Mbpd of Russian oil exports that could be lost due to sanctions or voluntary actions.

The prices reversed their sharp losses yesterday, as the investors weighed the possibility of additional sanctions on the Russian energy sector. At the same time, the Organization of the Petroleum Exporting Countries (OPEC) warned that it would be difficult to enhance output to counterbalance the Russian lost supplies.

The prices logged significant declines in the last two weeks over the news that the world consumers announced their plans to release a substantial amount of crude from their strategic petroleum reserves (SPR).

Also Read: Crude oil surges to 14-year highs on delays in Iranian talks

On Tuesday, both contracts settled up more thy 6% with Brent Crude oil settled at US104.64/bbl and WTI crude oil settled at US$100.60/bbl.

Source: Refinitiv Eikon

On Wednesday, June delivery Brent Crude oil futures inched higher and last traded at US$105.18 per barrel up 0.13%, while May delivery WTI crude oil futures exchanged hands at US$101.14 per barrel, up 0.54% at 12:00 PM AEDT.

Must Watch: As Russia-Ukraine War Intensifies, Commodities Also Soars

Lower Russian production

On Monday, the Russian condensate production tumbled below 10Mbpd to reach the lowest level since July 2020, as sanctions and logistics constraints hampered trade. The country's average oil output fell more than 6% to 10.32 million bpd on April 1-11 from 11.01 million in March.

Adding to this, the European Union has already banned Russian coal and now it is drafting proposals for the Russian oil embargo.

Furthermore, OPEC on Tuesday lowered its Russian liquid production forecast by 530,000bpd for 2022. Additionally, the cartel also cut its forecast for growth in world oil demand, primarily due to the Russia-Ukraine tussle.

Also Read: Crude oil slides from multi-year highs as Iran talks rev up

Bottom Line

Crude oil prices inched higher on Wednesday after recording significant gains on the previous day following the ease of lockdown situation in China, lower production of Russian gas condensate, and OPEC's warning related to potential supply losses.

Here’s how commodities performed in the last week click here



 


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