OIL FUTURES: Crude up as Russia-Ukraine energy ceasefire agreement crumbles

Crude oil futures rose in mid-afternoon Asian trade on March 21, following a deteriorating energy ceasefire agreement between Russia and Ukraine, as Russia's foreign ministry accused Kyiv of violations.

At 3:30 pm Singapore time (0730 GMT), the ICE May Brent futures contract was up 10 cents/b (0.14%) from the previous close at $72.10/b, while the NYMEX April light sweet crude contract was up 12 cents/b (0.18%) from the previous close at $68.19/b.

Earlier on March 21, Russia continued to extinguish fires at an oil depot in the Krasnodar region, triggered by a Ukrainian drone attack earlier this week, regional media reported.

Moscow's Foreign Ministry said on national television late March 20 that Ukraine had breached the US-proposed ceasefire by attacking the depot. Meanwhile, the Ukrainian port city of Odesa was set ablaze by a large-scale Russian drone attack late March 20, with reports that 150 drones were launched.

On March 18, both parties agreed to a 30-day ceasefire on energy infrastructure. The crumbling ceasefire fueled oil bulls, raising supply-side concerns.

Adding to supply disruptions, the US sanctioned an independent Chinese refinery, owned by Shandong Shouguang Luqing Petrochemical, on March 20 for purchasing millions of barrels of Iranian crude.

On the production side, OPEC+ proposed cuts for seven member nations that have been producing above their agreed-upon limits, analysts said, bolstering crude oil futures prices.

"These monthly cuts will range from 189,000 to 435,000 b/d and are set to continue until June 2026. This strategy is aimed at mitigating the impact of a planned production increase in April," Priyanka Sachdeva, senior market analyst at Phillip Nova said.

"Earlier this month, OPEC+ confirmed that eight member countries would increase their output by 138,000 b/d starting in April, which marks a partial reversal of the 5.85 million b/d in cuts established since 2022 to stabilize the market," Sachdeva added.

Still, gains in the complex were capped as growing uncertainty over US President Donald Trump's tariffs continued to encourage investors to take a headline-driven approach.

"Oil fundamentals indicate potential economic weakening, which could lead to softer demand for fuel in the future. This situation is further complicated by the Federal Reserve's confusion regarding the implications of Trump's tariffs on the economy, alongside ample supplies of oil from the Middle East," Phillip Nova's Sachdeva said.

On a technical front, a rebound in prices is still possible, analysts said.

"Brent crude oil shrugged off Tuesday's slump and rebounded yesterday, though it has struggled to push higher in early trading. Given the ongoing downtrend in crude, a reversal is still a distinct possibility, and a close back below $70/b would hand the initiative to the sellers," Chris Beauchamp, IG's chief market analyst said.

Dubai crude

Dubai crude swaps and intermonth spreads were mixed in mid-afternoon Asian trading March 21 from the previous close.

The May Dubai swap was pegged at $72.61/b at 2:10 pm Singapore time (0610 GMT), up by $1.14/b (1.60%) from the previous Asian market close.

The April-May Dubai swap intermonth spread was pegged at 92 cents/b, wider by 8 cents/b over the same period, and the May-June Dubai swap intermonth spread was pegged at 89 cents/b, wider by 15 cents/b over the same period.

The May Brent-Dubai exchange of futures for swaps was pegged at minus 30 cents/b, lower by 12 cents/b over the same period.