By Adedapo Adesanya
A warning given to the European Union (EU) by the Organisation of the Petroleum Exporting Countries (OPEC) concerning the possibility of replacing Russian crude supplies caused the oil market to rise by 6 per cent on Tuesday.
The oil cabal said it would be impossible to replace potential supply losses from Russia and this sent a signal to investors as the Brent crude went up by 6.26 per cent or $6.16 to $104.60 per barrel, while the United States West Texas Intermediate (WTI) crude rose by 44 cents or 0.44 per cent to $101.00 per barrel.
According to the Secretary-General of OPEC, Mr Mohammad Barkindo, replacing the contribution of Russia to the market would be difficult to achieve and members of the group would not be able to pump more to fill the gap.
“We could potentially see the loss of more than 7 million barrels per day (bpd) of Russian oil and other liquids exports, resulting from current and future sanctions or other voluntary actions.
“Considering the current demand outlook, it would be nearly impossible to replace a loss in volumes of this magnitude,” he said.
In the meeting with OPEC, the EU said the cartel could provide more production from its spare capacity, adding that it had a responsibility to ensure balanced oil markets.
This means that OPEC has now ignored calls from the bloc, the US, and the International Energy Agency (IEA) to pump more crude to cool prices.
Prices also found support as the relaxation of some COVID-19 restrictions in Shangai eased concerns about Chinese demand.
More than 7,000 residential units had been classified as lower-risk areas after reporting no new infections for 14 days and districts have since been announcing which compounds can be opened up.
In what signified a tighter market, OPEC raised its oil production by just 57,000 barrels per day in March from February, according to secondary sources in OPEC’s Monthly Oil Market Report (MOMR) published on Tuesday.
African members’ struggles to pump more crude partially offset increases at the core OPEC members of the Middle East with production in Libya, Nigeria, and Congo declining while output increased mainly in the three Arab Gulf producers—Saudi Arabia, Kuwait, and the UAE.
All 13 OPEC members—including Libya, Iran, and Venezuela which are exempted from the OPEC+ deal—pumped 28.56 million barrels per day in March, up by just 57,000 barrels per day from February.
Also, OPEC lowered its Russian liquids production forecast by 530,000 barrels per day for 2022, but also cut its forecast for growth in world oil demand, citing the impact of Russia’s invasion of Ukraine.
The market will be looking at the impact of the release of 240 million barrels that will be released by the IEA over the next six months from May in an effort to calm the market.
