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Oil surges amid warnings of supply shortages

Reuters . London
17 Mar 2022 18:53:39 | Update: 17 Mar 2022 21:28:10
Oil surges amid warnings of supply shortages
Industrial facilities of PCK Raffinerie oil refinery are pictured in Schwedt/Oder, Germany, March 7, 2022. The company receives crude oil from Russia via the 'Friendship' pipeline — Reuters Photo

Oil prices climbed 6 per cent on Thursday after the International Energy Agency (IEA) said three million barrels a day of Russian oil and products could be shut in from next month and despite the US Federal Reserve's decision to raise interest rates.

The supply loss would be far greater than an expected drop in demand of one million triggered by higher fuel prices, the IEA said in a report on Wednesday.

Benchmark Brent crude futures gained $6.41, or 6.5 per cent, to $104.43 a barrel by 1205 GMT US West Texas Intermediate (WTI) crude was up $5.95, or 6.3 per cent, to $100.99 a barrel.

Both contracts fell the previous day, following an unexpected jump in US crude stockpiles and signs of progress in Russia-Ukraine peace talks.

Morgan Stanley raised its Brent price forecast by $20 for the third quarter of 2022 to $120 a barrel, predicting a fall in the Russian production of about 1 million BPD from April.

The fall will more than offset a downward global demand revision of about 600,000 BPD, the bank said.

"Both supply and demand are hurting but supply is currently hurting more and a tight oil market for the coming two quarters is to be expected," bank SEB said.

Prices had sagged in the previous session on news that oil inventories in the United States climbed by 4.3 million barrels in the week to March 11 to 415.9 million barrels, according to the US Energy Information Administration. Analysts had expected a fall of 1.4 million barrels.

The oil market largely shrugged off a decision by the US Federal Reserve on Wednesday to raise interest rates by one-quarter of a percentage point, as anticipated.

The sentiment was somewhat boosted after China pledged policies to boost financial markets and economic growth while a decline in new Covid-19

cases in China spurred hopes lockdowns will be lifted to allow factories to resume production.

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