Oil rig

crude oil price holds a steady ground after bouncing back, above the critical level of $100 per barrel. Brent futures are trading at $107.49, a 1.19% drop, while WTI futures fell by 0.52% to $103.72.


The psychological level of $100 per barrel remains a steady support level regardless of limited supplies. At the beginning of the week, it dropped below this level due to fears that China’s Covid19 restrictions would affect demand.

The crude oil price has bounced back by over 10% within four sessions regardless of OPEC warnings on the current Ukraine crisis hence sanctions that lead to a surge in demand and global economic growth. The alliance predicts a 100.5 million bpd global oil consumption for 2022, which is 410,000 below its forecast before the Ukraine crisis.

Furthermore, the International Energy Agency (IEA) has reduced its prediction for global oil consumption by 260,000 bpd in 2022. It particularly forecasts a 925,000 bpd drop in April for China consumption.

Although the predicted drop in global economic growth may decrease oil demand, tight supplies will still significantly move the energy market. With the ongoing Ukraine crisis and imposed sanctions, supply distributions will probably sustain high crude oil prices.

For starters, weekly oil inventory reports from EIA indicate increased fuel consumption. Gasoline inventories fell by 3.649 million barrels for the week that ends on March 8th. This number is the largest draw since October last year and surpasses the predicted drop of 388,000 barrels. Last week, the stockpiles fell by 2.041 million barrels.

Concurrently, distillates in storage, mostly refined into diesel and jet fuel, fell by 2.902 million barrels. In comparison, analysts’ prediction was 515,000 for the draw after a build of 771,000 barrels last week. This decline leads to offsetting the surprise in crude oil stockpiles.

Moreover, in the meeting with EU delegates, OPEC reported that the ongoing and future sanctions against Russia would probably lead to a huge supply shock. Additionally, the alliance noted that the 7million bpd of Russia’s oil is irreplaceable.

Despite persistent calls from key consuming nations to increase production, the alliance has maintained modest output increases of 400,000 bpd in recent months. IEA member countries plan on making SPR releases amounting to 240 million barrels over six months to ease the soaring crude oil price. Nonetheless, the move may not be enough to solve the supply shortages caused by dwindling stockpiles and underinvestment in the hydrocarbons sector.

Regardless of continuous calls from significant consuming countries to increase production, the alliance has recently sustained modest output increases of 400,000 bpd. IEA member countries plan on making SPR releases amounting to 240 million barrels within six months to reduce the hiking crude oil price. This may not be adequate to curb supply challenges due to weakening stockpiles and low investments in the hydrocarbons sector.

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