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Highlights
- Crude oil prices reached multi-year highs amid rising tensions between Russia and Ukraine.
- The US’ decision to put an embargo on Russian oil imports has tightened oil supply bottlenecks.
- The EIA foresees prices of both benchmarks to remain above US$100 a barrel in the coming months.
Worldwide energy markets have been rocked in the last few weeks on global supply fears triggered due to Ukraine’s invasion by Russia. Prices of crude oil, the largest traded commodity in the world, reached 14-year highs on 7 March 2022 due to sanctions imposed by Western allies, including the US, the UK, and the European Union, on Russian crude oil and other fossil fuel imports.
Furthermore, the Energy Information Administration (EIA) forecasts that prices of both benchmarks would remain above US$100/barrel in the coming months, reflecting geopolitical unrest between Russia and Ukraine and the tight energy market with current and possible future sanctions on Russia.
Good Read: How a Russian invasion of Ukraine might impact crude oil prices
The crude oil market has been on a roller-coaster ride for more than two weeks. Both major oil benchmarks have traded in their largest high-to-low range over the last 30 days than at any time since mid-2020.
Prices of Brent Crude Oil hit US$139.13 per barrel on 7 March, the level not seen since July 2008. However, the rally didn’t continue for a long period, and prices got a trend reversal on 9 March 2022 after the Organization of the Petroleum Exporting Countries (OPEC) members, including the UAE and Saudi Arabia, pledged to pump more oil into the market from their spare capacity.
Must Read: Crude oil rises on fresh Russia-Ukraine war warnings
Moreover, prices extended their downward trend this week too, on prospects of easing tensions between Russia and Ukraine.
Source: EODHD/Others Eikon
On Wednesday, May delivery Brent Crude oil futures declined significantly and closed at US$96.93 per barrel, while April delivery WTI crude oil futures settled at US$95.04 per barrel, the lowest level since 1 March 2022.
Must Read: Crude oil hits fresh seven-year high amid Russia-Ukraine tension
EIA’s forecast
Amid this gloomy setting, the EIA forecasts that prices of WTI crude oil would average US$113 a barrel in March and US$112 a barrel in the second quarter of 2022. A heightened level of uncertainty caused by various factors like Russia's invasion of Ukraine backs these forecasts.
At the same time, the agency also expected Brent crude oil prices to average US$117/barrel in March, US$116 per barrel for the second quarter of the current year and US$102 a barrel in the second half of 2022, as per its March STEO released last week.
Also Read: WTI Crude surpasses US$90/bbl as frigid weather cascades across the US
Bottom Line
Lately, Crude oil prices have shown significant volatility due to escalated tensions between Russia and Ukraine. The EIA foresees prices of both oil benchmarks to remain high and trade above US$100 a barrel in the coming months.