By Adedapo Adesanya
The return of supply worries to the oil market caused the price of the Brent crude to rise by 4.02 per cent or $4.21 on Wednesday to $108.86 per cent, while the United States West Texas Intermediate (WTI) crude futures appreciated by 3.69 per cent or $3.67 to $104.29 per barrel.
The cause of the concerns was the disappointing outcome of the peace talks between Russia and Ukraine negotiators.
Russian President, Mr Vladimir Putin said Ukraine derailed peace talks, vowing to continue with the “special military operation.”
In a rare public appearance, he said peace talks had reached a dead end and insisted the invasion – which is in its sixth week – was going as planned.
To analysts, this signified that supply disruptions will return to the market even as the US is releasing 180 million barrels from its reserves over six months, part of a release of 240 million barrels from members of the International Energy Agency (IEA).
Meanwhile, the world’s largest oil trader, Vitol, has made known plans to wind down its activities involving Russian crude oil by the end of the year.
According to a spokesperson, trade with Russian oil “will diminish significantly in the second quarter as current term contractual obligations decline,” adding that, “we anticipate this will be completed by end of 2022”.
Reports noted the announcement was made following an urge from the Ukrainian government addressed to the four major commodity traders to stop dealing in Russian oil, the revenues from which, the Ukrainian government says, are used to finance the war in Ukraine.
The Organisation of the Petroleum Exporting Countries (OPEC) has said it would be impossible to replace expected supply losses from Russia and it would not pump more crude.
OPEC on Tuesday cut its forecast for 2022 global oil demand growth, citing Russia’s invasion of Ukraine, inflation and resurgence of the pandemic in China. OPEC expects global demand to grow by 3.67 million barrels per day in 2022, down 480,000 million barrels per day from its previous forecast.
On its part, the IEA also on Tuesday lowered its expectations for worldwide demand and said it anticipated rising global production could offset Russian oil output losses.
The IEA said it expects Russian output to drop 1.5 million barrels per day in April, growing to close to 3 million barrels per day from May.
Prices were pressured after the US Energy Information Administration (EIA) reported that crude oil inventories had added 9.4 million barrels in the week to April 8.
At 421.8 million barrels, oil inventories are about 13 per cent below the five-year average for this time of the year.
Last week’s build compared with an inventory build of 2.4 million barrels for the previous week. It also compares with an estimated inventory increase of as much as 7.757 million barrels for last week, as reported by the American Petroleum Institute (API).
Modupe Gbadeyanka