Oil lifted as Putin vows to press ahead with war in Ukraine
Oil futures rose Wednesday, extending a gain seen the previous session after Russian President Vladimir Putin said negotiations with Ukraine had hit a dead end.
West Texas Intermediate crude for May delivery
was up $1.97, or 2%, at $102.57 a barrel on the New York Mercantile Exchange.
June Brent crude
the global benchmark, gained $2.21, or 2.1%, to trade at $106.85 a barrel on ICE Futures Europe.
Putin on Tuesday said Russia “had no other choice” but to launch what he has termed a “special military operation,” pledging it would “continue until its full completion and the fulfillment of the tasks that have been set.” Russia is concentrating its forces on the eastern Donbas region after its attempts to capture the capital of Kyiv were thwarted.
Reuters on Tuesday reported that Russian oil and condensate production had fallen below 10 million barrels a day on Monday as a result of sanctions and logistical problems. The report said Russian production had fallen more than 6% to 10.32 million barrels a day April 1-11 from an average of 11.01 million barrels a day in March.
“Russia probably has not yet solved the problem of drastically changed logistics due to sanctions. But investors should also bear in mind how devastating the sanctions have been on the energy sectors of Iran and Venezuela, where production decreased 2-4 times from the pre-sanctions peak,” said Alex Kuptsikevich, senior market analyst at FxPro, in emailed comments.
“The falling volumes of these countries have been replaced by Russia, the U.S. and Saudi Arabia, but there is little indication that the latter two have the strength to pick up the former’s export share,” Kuptsikevich wrote.
The International Energy Agency, in its monthly report, said Wednesday that a move by the U.S. and its allies to release oil from their reserves — a move the IEA helped coordinate — should help counter the loss of Russia’s vast supplies after its invasion of Ukraine.
The IEA cut its demand forecast for the year by 260,000 barrels a day due to a lockdown in Shanghai that has shut off the city of 25 million people. The Paris-based agency now expects total demand for the year to stand at 99.4 million barrels a day.
The IEA estimated that up to 3 million barrels a day of Russian oil could be lost to global markets by next month as the country’s oil companies–facing a dearth of customers and steep discounts for the oil they pump–shut in wells.
The American Petroleum Institute reported late Tuesday that U.S. crude supplies rose by nearly 7.8 million barrels for the week ended April 8, according to sources. The API also reportedly showed a weekly inventory decline of almost 5.1 million barrels for gasoline, while distillate stockpiles fell by about 5 million barrels.
Inventory data from the Energy Information Administration will be released Wednesday. On average, the EIA is expected to show crude inventories up by 300,000 barrels for the week, according to analysts polled by S&P Global Commodity Insights. The survey also showed expectations for weekly supply declines of 800,000 barrels for gasoline and 1.5 million barrels for distillates.
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