Oil prices rose more than 3% during Monday’s trading, with Brent crude trading above $107, with concerns about a tight supply continuing.
This comes despite investors’ aspiration to free supplies from strategic oil reserves from consuming countries and the armistice in Yemen; This raised hopes that supply problems in the Middle East might recede.
Oil prices fell by about 13%, last week, after US President Joe Biden announced that up to one million barrels per day of the US strategic oil reserve would be sold for a period of 6 months, starting next May.
Biden said the issuance, the third in the past six months, would serve as a bridge so domestic producers can increase production and balance supply and demand.
Oil Prices Today
Brent crude futures prices – for June 2022 delivery – rose by 2.8%, recording $107.82 a barrel.
The prices of West Texas Intermediate crude futures – for delivery in May – also rose by 3.5%, to reach $102.84 a barrel.
During the past week, Brent crude and West Texas crude recorded losses of about 11% and 13%, respectively, to be the worst weekly performance since April 2020.
The United Nations brokered a two-month truce between a Saudi-led coalition and Iran-aligned Houthi militias for the first time in the seven-year conflict.
Saudi oil facilities were attacked by the Houthis during the conflict; What increased the disruption of supplies from Russia.
“The fragile détente does little to mitigate the absence of Russian oil,” said Stephen Innes, managing partner at SBI Asset Management.
Industry sources said production of oil and gas condensate in the world’s second largest exporter fell to 11.01 million barrels per day in March from an average production of 11.08 million barrels per day in February.
The Russian oil industry has been hit by Western sanctions and buyers’ alienation after the Russian invasion of Ukraine, and estimates of Russian oil supply losses range between 1 million and 3 million barrels per day.
Strategic Oil Reserves
The US Energy Department has formally identified the sale of oil from emergency reserves, while members of the International Energy Agency also agreed to release more oil on Friday, and the agency said the volume will be announced this week.
“The combined efforts of the United States and its allies can temporarily balance the supply shortfalls in 2022, but it may not be a long-term solution,” said CMC Markets analyst Tina Ting.
“American oil producers may be reluctant to increase production to keep profits high,” she added
American Oil Rigs
Despite Biden’s calls for US energy companies to increase production; The growth in the number of rigs is still slow; As prospectors continue to return money to shareholders from higher crude oil prices rather than increase production.
Demand concerns remain in China, the world’s largest oil importer; Shanghai, its most populous city, has extended COVID-19 lockdown measures.
China’s Ministry of Transport expects a 20% drop in road traffic and a 55% drop in flights during the three-day Qingming holiday that begins on Sunday due to the outbreak of COVID-19 cases in the country.