Crude oil rises on OPEC’s warning of tight supplies

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Highlights

  • Crude oil prices inched up on Monday.
  • The Organisation of the Petroleum Exporting Countries (OPEC) has warned that it would be difficult to enhance output to counterbalance the Russian lost supplies.
  • the International Energy Agency (IEA) members decided to release 240 million barrels from strategic petroleum reserves (SPR) in the coming six months.

Crude oil prices rose during the earlier trading sessions on Tuesday, reversing their sharp losses as the investors weighed the possibility of additional sanctions on the Russian energy sector. At the same time, the Organisation of the Petroleum Exporting Countries (OPEC) warned that it would be difficult to enhance output to counterbalance the Russian lost supplies.

The prices record significant declines in the last two weeks. On Monday, the prices tumbled over the news that the world consumers announced their plans to release a substantial amount of crude from their strategic petroleum reserves (SPR). Furthermore, the prices were also weighted due to an ongoing lockdown in China that squeezed overall demand in China, one of the largest consumers of crude in the world.

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

Adding to this, the International Energy Agency (IEA) members decided to release 240 million barrels from strategic petroleum reserves (SPR) in the coming six months to suppress price gains. Out of the total, 180 million will be released from U.S. stockpiles.

On Monday, both contracts settled down nearly 4% over concerns that massive oil release by IEA coupled with lower demand in China would ease the future supply concerns.

Source: Refinitiv Eikon

On Tuesday, June delivery Brent Crude oil futures inched lower and last traded at US$100.06 per barrel up 1.60%, while May delivery WTI crude oil futures exchanged hands at US$95.91 per barrel, up 1.72% at 12:15 PM AEDT.

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

More Russian sanctions

The European Union has already banned Russian coal and now it is drafting proposals for the Russian oil embargo. However, currently, there is no agreement among members on crude from Russia.

The current rise in oil prices is underpinned by a warning from the OPEC that some 7Mbpd of Russian oil and other liquids exports could be lost due to sanctions or voluntary actions, and that it would be impossible to replace those volumes.

Source: © Lancemichaels | Megapixl.com

The IEA is expected to release roughly 2 million barrels of daily supply for the next two months - plus another 1 million bpd from the US for four months after that. 

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

Bottom Line

Crude oil prices inched up on Tuesday as the investors weighed the possibility of additional sanctions on the Russian energy sector. The prices were earlier weighted due to subdued demand in China amid ongoing lockdowns and IEA’s reserve release plan.

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


 


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