Oil Market Soars on Supply Concerns, Improved Demand

By Adedapo Adesanya

The oil market rose on Thursday as the market focused on Russian oil supply concerns, rebounding Chinese demand, and interest rates hike in England.

The Brent crude was sold for $90.46 per barrel after it gained 63 cents or 0.7 per cent, with the United States West Texas Intermediate (WTI) crude going for $83.49 per barrel after it appreciated by 55 cents or 0.7 per cent.

Russia pushed ahead with its biggest conscription since World War II, raising concerns that an escalation of the war in Ukraine could further hurt supply.

President Vladimir Putin announced earlier this week a military draft to enlist 300,000 troops to fight in Ukraine, as it appears to be trying to regain the upper hand in the conflict which started seven months ago.

In what signalled a possible concern for the market, Mr Putin said Russia would use all the means at its disposal to protect itself, an apparent reference to nuclear weapons.

This is coming when supply constraints from the Organization of the Petroleum Exporting Countries (OPEC) are restricting the market.

Data showed that the cartel is producing less than 3.5 per cent of its expected output, caused by shortfalls from Nigeria and Angola.

Support also came as crude oil demand in China, the world’s largest oil importer, is rebounding, having been dampened by strict COVID-19 restrictions.

Chinese state oil refineries and a privately run mega refiner are considering increasing their crude purchase by up to 10 per cent in October from September, eyeing stronger demand and a possible surge in fourth-quarter fuel exports.

Also, the Bank of England raised its key interest rate by 50 basis points to 2.25 per cent and said it would continue to respond forcefully to inflation.

The rate hike was less than markets had been pricing and defied some expectations that UK policymakers might be forced into a larger move.

This followed the US Federal Reserve’s 75 basis points rise on Wednesday, just as rate increases have been seen in the Swiss National Bank, Norges bank and Indonesia’s central bank, and the South African Reserve Bank.