ISLAMABAD
Crude oil futures posted gains for the second week in a row on supply concerns due to Russia’s military offensive in Ukraine and growing possibility of European sanctions on Moscow’s energy exports, despite Covid-19 lockdowns in China hurt demand.
Oil prices notched a weekly gain of around five percent after posting a weekly gain of nearly 0.46 percent in the preceding week. Brent, the international benchmark for two-thirds of the world’s oil, jumped by $5.25 (+4.90 percent) to $112.39 from $107.14 on a week-on-week (WoW) basis. The West Texas Intermediate (WTI), the main oil benchmark for North America, went up by $5.08 a barrel (+4.85 percent) to $109.77 from $104.69 on a weekly basis.
The price for Opec Basket increased from $105.33 to $113.04 on a week-on-week basis, showing an increase of $7.71 (+7.32 percent). The OPEC Reference Basket of Crudes (ORB) is made up of Saharan Blend, Girassol, Djeno, Zafiro, Rabi Light, Iran Heavy, Basra Light, Kuwait Export, Es Sider, Bonny Light, Arab Light, Murban and Merey.
The price of Russian Sokol jumped by $3.97 (+4.14 percent) to $99.81 from $95.84 on WoW basis. Similarly, Arab Light prices witnessed an increase of $4.47 (+4.04 percent) to reach $115.04 from $110.57 a barrel on a weekly basis.
The European Union’s (EU) proposal to ban imports of all Russian crude and oil products by the end of the year trumped market concerns about slowing Chinese oil demand amid the harshest Covid-19 restrictions since the initial wave of the pandemic. The European Commission on Wednesday last officially proposed a full ban on Russian crude and oil product imports by the end of the year.
“Let us be clear: it will not be easy. Some Member States are strongly dependent on Russian oil. But we simply have to work on it. We now propose a ban on Russian oil. This will be a complete import ban on all Russian oil, seaborne and pipeline, crude and refined,” European Commission President Ursula von der Leyen said at the European Parliament.
Some EU members, most notably Hungary, are pushing against a full embargo on Russian oil, and talks among member states continue as they look to reach a consensus since the Commission’s proposal requires the approval of all 27 EU countries. The proposal is yet to be officially approved by the EU Parliament.
On the other hand, OPEC+ ended its meeting with no changes to its production plan, aiming to boost crude oil production in June by 432,000 barrels per day (bpd), in a move widely expected by the market. While OPEC+ is sticking to its policy of modest monthly increases, many of its members are not pumping to their quotas and the group overall is estimated to be around 1.5 million bpd below its quota.
The US oil rig count continued to rise during the week, but that has not led to increased production. Oil rigs rose by five to 557, the weekly Baker Hughes report showed.
The imposition of Covid-19 curbs in parts of China, the world’s second largest economy and the top importer of oil, weighed on crude prices, limiting further gains. China has introduced strict movement curbs in Shanghai, its largest city, to control the spread of the pandemic. New cases have also been detected in the capital Beijing as the government continues to carry out mass testing to isolate every infected person as part of its “zero-Covid” strategy.
