Oil rises on Libya’s supply drop & Shanghai’s rising demand prospects

Highlights

• Crude oil prices rose on Tuesday.
• The current rise in oil prices is also underpinned by strong prospective demand in China.
• The possibility of a European Union ban on Russian oil continues to keep the market on edge.

Crude oil prices slightly changed on Tuesday after climbing nearly 1% on Monday as outages in Libya strengthened the concerns over tight global supply amid the ongoing Russia-Ukraine crisis.

The current rise in oil prices is also underpinned by strong prospective demand in China as factories in Shanghai are prepared to reopen after nearly three-week COVID-19 lockdowns.

The prices of Brent Crude Oil topped US$114 per barrel on Monday after Libya said it could not deliver oil from its biggest field and shut another field due to political protests.

Though the gains were limited with the dollar trading at a fresh two-year high. A stronger dollar makes oil more costly for other currency holders.

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

On Monday, both contracts settled up more than 1% with Brent Crude oil settled at US113.16/bbl and WTI crude oil settled at US$108.21/bbl.

Source: Refinitiv Eikon

On Wednesday, June delivery Brent Crude oil futures inched higher and last traded at US$113.30 per barrel up 0.12%, while May delivery WTI crude oil futures exchanged hands at US$107.56 per barrel, down 0.05% at 12:10 PM AEDT.

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

Prospects of European sanctions

On top of the ongoing crisis in the oil market, the possibility of a European Union ban on Russian oil continues to keep the market on edge. European Union has already banned Russian coal and now it is drafting proposals for the Russian oil embargo.

Analysts across the globe believe that more countries banning Russian oil imports would mean oil prices reaching historic highs.

Currently, the world is seeing a tug of war match between China’s COVID demand crunch and global supply deficits.

Furthermore, OPEC during the first of the month 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.

Crude oil prices have been trending up since the beginning of the war between Russia and Ukraine. The prices of both the oil benchmarks gained significantly in the last two months with Brent briefly topping $139.13/bbl in March, the highest since 2008.

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

Bottom Line

Crude oil prices inched higher on Tuesday after recording more than 1% gains on the previous day following outages in Libya strengthening the concerns over tight global supply. Crude oil prices have been trending up since the beginning of the war between Russia and Ukraine on 24 February 2022.

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