Oil has been wracked by intense volatility over the past six weeks as Russia’s invasion of Ukraine roiled commodity markets. In response to the war, Washington and its allies have been trying to punish Russia economically, while also moving to stem the rise in energy prices that’s fanning already-elevated inflation. The scale of the combined crude releases is unprecedented.
Oil traders were also assessing the consequences of a hawkish pivot from the Federal Reserve as policymakers rein in the support they deployed to cushion the impact of the pandemic. In addition to rate rises, the Fed signalled it will reduce its bond holdings at a maximum pace of US$95 billion a month.
Prices:
- West Texas Intermediate for May delivery rose 1% to US$97.23 a barrel on the New York Mercantile Exchange at 8.17 am. in Singapore.
- Brent for June settlement climbed 1.1% to US$102.16 a barrel on the ICE Futures Europe exchange after dropping 5.2% on Wednesday.
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China, the world’s biggest crude importer, has been trying to stamp out a virus outbreak that’s prompted lockdowns, including in the commercial hub of Shanghai. As officials tackle the challenge, tankers carrying 22 million barrels of Russian, Iranian and Venezuelan oil are piling up off the coast, Kpler said.
While oil markets are still in backwardation, a bullish pattern where near-term contracts are more expensive that later-dated ones, there’s been a significant narrowing of key differentials in recent days as traders reassess the outlook. Brent’s prompt spread – the gap between its two nearest contracts – was 88 US cents a barrel in backwardation, down from US$3.20 a week ago.
