Oil prices edged up on Monday as concerns over restricted supply lingered, even as investors awaited the release of supplies from consuming nations’ strategic reserves and a truce in Yemen stoked expectations that the Middle East’s supply difficulties would be resolved.
Brent oil futures were up 9 cents, or 0.09 percent, to $104.48 a barrel at 0427 GMT, while WTI crude was up 3 cents, or 0.03 percent, to $99.30 a barrel. When the markets opened on Monday, both futures were down $1.
For the first time in the seven-year conflict, the UN arranged a two-month truce between a Saudi-led coalition and the Houthi militia linked with Iran. During the battle, the Houthis have attacked Saudi oil installations, causing supply interruption from Russia. find out more
In a note, Stephen Innes, managing partner at SPI Asset Management, stated, “Still, the shaky detente does nothing to mitigate the absence of Russian oil.”
According to industry sources, oil and gas condensate production in the world’s No. 2 exporter decreased to 11.01 million barrels per day (bpd) in March, down from an average of 11.08 million bpd in February. Following Russia’s invasion of Ukraine, Western sanctions and customer aversion have harmed the Russian oil business. The loss of Russian oil supplies is estimated to be between 1 million and 3 million barrels per day.
Last week, oil prices plummeted 13% when US President Joe Biden stated that up to 1 million barrels per day (bpd) of oil will be sold from the US Strategic Petroleum Reserve (SPR) for six months beginning in May. The release, which is the third in the last six months, will act as a stopgap until domestic producers can increase output and bring supply and demand back into balance, according to Biden.
On Friday, the US Energy Department formally announced a sale of oil from emergency stockpiles, while members of the International Energy Agency agreed to release extra oil. The volume will be made public this week, according to the IEA.
In a note, Tina Teng, a markets analyst at CMC Markets APAC & Canada, said, “The US and its allies’ combined efforts might temporarily balance out supply gaps in 2022, but it could not be a long-term answer.”
“Also, U.S. oil producers may be hesitant to raise output in order to maintain strong profit margins.”
Despite Biden’s appeals for U.S. oil companies to increase output, rig count growth has been modest, as drillers choose to return profits to shareholders rather than increase production.
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