Where is the oil market headed in next few weeks?

Highlights

• Analysts across the globe believe that the oil market might be headed into another week of uncertainty.
• Despite an ongoing supply shortage across the globe, OPEC+ is abiding by its original plan of increasing the output in a modest manner.
• Oil watchdogs believe that the worldwide oil market would find it difficult to get enough supply in the coming months as Russian exports are curtailed.

The global crude oil market has been volatile for the past few weeks amid ongoing political turmoil between Russia and the Western nations over Ukraine's invasion. Analysts across the globe believe that the oil market might head into another week of uncertainty, buffeted by rising COVID-19 cases in China, the world's largest crude importer, and continuing tension between Russia and Ukraine. However, the International Energy Agency members’ plan to release 240 million barrels from strategic petroleum reserves (SPR) in the coming six months may provide temporary relief to boiling oil prices but it is not a permanent solution.

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

Crude oil prices started their rally on 24 February 2022, the day Russia officially announced to invade Ukraine, and the bulls are not yet tired. The prices of both oil benchmarks reached 14-year highs in the first half of March 2022, after the US declared sanctions on Russian oil imports.

Though the prices cooled off to a certain level, they still remain 58% higher relative to the levels seen in the same period last year.

What is OPEC doing?

Despite an ongoing supply shortage across the globe, the Organization of the Petroleum Exporting Countries (OPEC) and its allies (together known as OPEC+) have stood by their original plan of increasing the output in a modest manner.

Source: © Dianaopryshko | Megapixl.com

The group has boosted output targets by 400,000 bpd each month since August 2021. However, from 1 May 2022, this monthly target will increase marginally to 432,000 bpd.

The marginal increase in output by the cartel comes despite a unanimous call from leading oil-consuming countries, urging producers to raise their output effectively due to rising energy demands and ongoing supply disruptions.

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

At the same time, major OPEC members, including the UAE and Saudi Arabia, have held back their plans of increasing output.

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

While OPEC+ has boosted its target for every month, production has not met those targets because some members struggle with capacity constraints.

Uncertainty in oil prices to linger

Oil watchdogs believe that the worldwide oil market would find it difficult to get enough supply in the coming months as Russian oil exports are curtailed, and Western allies are planning more strict sanctions.

Source: © Batareykin | Megapixl.com

United Arab Emirates energy minister Suhail al-Mazrouei said in the last week of March that energy markets need Russian oil, and no producer can substitute its production.

However, a steep rise in fresh coronavirus cases in China’s Shanghai has placated the mounting supply concerns to a certain level. Furthermore, the Biden Administration's plan, along with other members of the International Energy Agency, to release nearly 60 million barrels of crude from strategic reserves could provide short-term relief to the oil market.

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

Bottom Line

The global oil market has been on a roller-coaster ride since Russia officially announced to invade Ukraine. The prices have been volatile due to rising supply concerns after Western nations imposed sanctions on Russian oil. The market is expected to witness further effects in the coming weeks, with Russian supplies curtailed.