Oil gains 3% as Ukraine conflict offsets Iran supply hopes

Brent on track for highest close since June 2014


REUTERS March 05, 2022
While the Omicron coronavirus variant is rapidly taking hold, demand-side concerns are easing amid rising evidence that it is less severe than previous variants.. PHOTO: REUTERS

NEW YORK:

Oil climbed about 3% on Friday in a volatile session as the disruption of Russian exports from Western sanctions outweighed hopes for more Iranian supply if Washington reaches a nuclear deal with Tehran.

Prices have soared over the past week after the United States and allies sanctioned Russia following its invasion of Ukraine. Russian oil sales have been disrupted, with sellers unable to place orders even as they offer massive discounts to benchmark Brent crude.

Brent was on track for its highest close since June 2014 and WTI for its highest close since May 2011. During the week, Brent rose to its highest intraday since May 2012 and WTI is highest since September 2008.

Prices rallied after Russian troops seized Europe’s biggest nuclear power plant. A blaze in a training building was extinguished and officials said the facility was now safe.

Brent futures rose $3.36, or 3.0%, to $113.82 a barrel by 12:04 PM EST (1704 GMT), while US West Texas Intermediate (WTI) crude rose $3.43, or 3.2%, to $111.10.

“Iran claims it will be able to ramp up production quickly, but the potential disruptions of Russian supplies are too big of a shock for energy markets,” said Edward Moya, senior market analyst at OANDA.

Russia exports roughly 4 million to 5 million barrels of crude every day, more than any nation apart from Saudi Arabia. Buyers have been paying dearly for other grades while shunning Russian barrels. On Friday, Shell bought a shipment of Russian oil at a discount of more than $28 to current physical Brent, a signal of how impaired the Russian market is at the moment.

Crude prices are set to post their strongest weekly gains since the middle of 2020, with the US benchmark up more than 21% and Brent 16%. 

Published in The Express Tribune, March 5th, 2022.

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