Oil continues to surge on supply concerns; Brent crude crosses $118/bbl

SINGAPORE (ICIS)–Oil prices continued to surge on Thursday, with Brent crude crossing the $118/bbl mark, on concerns about a major shortfall in global supplies as the Russia-Ukraine war intensifies.

02:15 hours GMT	Contract	Low	High	Open	Last	Previous	Change	High Change
Brent	May	114.85	118.22	115.27	116.55	112.93	3.62	5.29
WTI	Apr	110.6	114.7	111.33	113.41	110.6	2.81	4.1

Overnight, Brent crude closed 9.6% higher to its highest since August 2014, while US WTI crude ended the session up 7%.

Worries that oil supply will remain tight for months to come following sanctions on Russia and ensuing massive divestments by major companies from Russian oil assets continue to drive up prices.

Meanwhile, oil cartel OPEC and its allies (OPEC+) on Wednesday agreed to stick to their original plan of a gradual increase in production, noting that the current price movement was a result of geopolitics.

As planned, OPEC+ crude output will rise by 400,000 bbl/day in April.

“However, whilst members believe that the current price environment reflects geopolitical risks, it is becoming clearer that the Russia-Ukraine conflict is having an impact on the demand for Russian oil,” Netherlands-based ING said in a note on Thursday.

“Buyers are increasingly reluctant to commit to Russian oil given sanctions risk,” it said.

Further indication of tight supply in the US also continued to fire up oil markets.

Latest numbers from the Energy Information Administration (EIA) showed that US commercial crude oil inventories fell by 2.6m bbl/day over the last week.

“Concern over broader tightness in the global market, along with falling Cushing inventories has seen the prompt WTI time spread balloon to a backwardation of almost $3.60/bbl,” ING said.

Focus article by Nurluqman Suratman

Thumbnail photo: Airstrike by Russian forces on Zhytomyr, Ukraine – 02 Mar 2022. (Source: Emergency Service of Ukraine/ZUMA Press Wire Service/Shutterstock)

Click here to read the Ukraine topic page, which examines the impact of the conflict on oil, gas, fertilizer and chemical markets.