On Monday, Brent Crude momentarily surged past $86 per barrel, marking its highest point since November, before retreating slightly. This uptick came amidst intensified attacks by Ukraine on Russian energy infrastructure. Brent crude oil futures for May delivery rose by 51 cents to reach $85.85 per barrel at 1333 GMT. Meanwhile, the April contract for U.S. West Texas Intermediate (WTI) crude increased by 62 cents to $81.66, albeit in sluggish trading due to the contract’s impending expiry. The more actively traded May delivery contract saw a 60-cent rise to $81.18.
“The strikes on Russian refineries last week added $2-$3 per barrel of risk premium to crude, which persists as we witness further attacks over the weekend,” Vandana Hari, founder, Vanda Insights, said.
A Reuters analysis revealed that these attacks have halted approximately 7% of Russian refining capacity in the first quarter. Consequently, Russia is anticipated to augment its oil exports through western ports in March by nearly 200,000 barrels per day (bpd), surpassing the monthly plan of 2.15 million bpd, according to market sources.
Morgan Stanley raises Brent Crude price forecast
Due to these Russian disruptions and prolonged OPEC+ output cuts, Morgan Stanley has revised its Brent oil price projections upwards by $10 per barrel to $90 for the third quarter of 2024. Both oil contracts experienced gains last week, reaching their highest levels since November. This surge was partly attributed to the International Energy Agency’s repeated enhancements to its 2024 demand forecast since November.
On the supply front, Iraq announced plans to decrease its crude exports in the forthcoming months by over 100,000 bpd from the levels recorded last month, in order to offset any excess above its OPEC+ quota in January and February. Iraq has pledged to adhere to voluntary cuts agreed upon with the OPEC+ coalition, which were recently extended into the second quarter.
US Federal Reserve expected to maintain interest rates amid inflation concerns
This week, the focal point shifts to the monetary policy decisions of major economies, as numerous central banks have maintained elevated interest rates to mitigate persistent inflationary pressures. Tony Sycamore, a market analyst with IG, anticipates that the conclusion of the U.S. Federal Reserve’s two-day meeting on Wednesday will provide clarity on the timing of interest rate adjustments. It is likely that the Fed will retain its rates unchanged this month, with the possibility of a rate cut at the June meeting now seen as a 50/50 chance. Lower interest rates could potentially stimulate demand in the U.S., the largest oil consumer globally, thereby bolstering oil prices.
(With inputs from Reuters)