Tuesday’s flat price of crude oil was caused by geopolitical turmoil and worries about supply. Growing demand uncertainty caused prices for Brent and West Texas Intermediate to drop sharply on the market.
But before the business day ended, ICE Brent rose to $86.75 a barrel. ING stated in a note that the Joint Ministerial Monitoring group of OPEC+ is not expected to suggest any revisions to the present production cuts deal until the end of the second quarter of this year. The group meets next week.
As the present sanctions exemption expires in April 2024 and the US has not yet decided whether to grant additional relief, the uncertainty surrounding Venezuela’s supply continues. According to media reports, some consumers—including those in India—have already started cutting oil purchases from the country amid the uncertainty.
Due to worries about supply constraints, European natural gas prices surged to intraday highs of EUR29/MWh yesterday, continuing their upward trend for a second straight session.
Reports suggest that Russia’s recent drone attack targeted an underground gas storage facility in western Ukraine. However, there are no reports of major damage to the underground storage facility.
This led to supply jitters in the market. The European gas market remains well-supplied currently, with tanks at 59% full compared to a seasonal average of around 42%.
Recall that the oil market opened higher this week after trading soft for three consecutive days last week amid global tensions. ICE Brent prices recovered to around $86 following a terrorist attack in Russia over the weekend.
Meanwhile, continued drone attacks by Ukraine on Russian oil refineries keep the risk premium for the oil market higher. Weekly data from Baker Hughes shows that US oil rigs fell by one rig over the last week, with the total oil rig count reaching 509 for the week ended 22 March 2024, according to ING.
Analysts said the strength in oil prices will keep supporting the investments in oil exploration activities. Gas rigs fell by four to 112 over the reporting week, primarily due to suppressed gas prices.
This was the lowest rig count since January 2022. The total rig count (oil and gas combined) stood at 624 over the reporting week, down from 629 a week earlier.
