Crude oil futures surged in mid-morning Asian trade March 1 as the market shrugged off the release of strategic petroleum reserves against the threat of further sanctions on Russian energy markets.
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At 10:19 am Singapore time (0219 GMT), the May ICE Brent futures contract was up $4.92/b (4.69%) from the previous close at $109.89/b, while the April NYMEX light sweet crude contract was $4.65/b (4.50%) higher at $108.06/b.
The US Energy Information Administration announcement of the release of 60 million barrels of crude brought little comfort to oil markets, as it was largely in line with expectations and seen as insufficient to act as a counterweight to the disruption to Russian oil supplies.
Russia exports around 7 million b/d, of which 4.5 million b/d is crude, S&P Global Commodity Insights data showed.
"Energy traders shrugged off the EIA announcement that 60 million barrels of crude will be released. Crude prices can't stop going higher as a very tight oil market will likely see further risk to supplies as the war in Ukraine unfolds," Edward Moya, senior market analyst with Oanda, said in a note March 2.
"Markets are also clearly disappointed with the size of the strategic reserves release.... the 60 million barrels equivalent to just 4% of its overall emergency stockpiles and accounting for less than one day of worldwide oil consumption," Yeap Jun Rong of IG said March 2.
Following announcements by oil majors BP, Shell and Equinor exiting the Russian market, shipping industry majors were looking to follow suit, which may lead to severe trade disruption in the region.
"The shipping industry is also baulking at its involvement, with shipping giants Maersk and MSC Mediterranean Shipping halting trade in the region. Almost half of the world's container ships are refusing to go to and from Russia," Brian Martin of ANZ Research said in a note March 2.
"According to tanker loading schedules, there are more than 80 tankers required to collect 61 million barrels of crude from Russian ports this month," Martin added.
Meanwhile, the OPEC+ technical committee has met ahead of the March 2 meeting but has thus far refused to expedite the unwinding of its production quotas and continues to underperform against those quotas, S&P Global reported earlier.
"This also represents a challenge for the OPEC+ alliance. The group's technical committee met overnight and cut its forecast for this year's daily oil surplus by about 200k to 1.1 million b/d. Saudi Arabia said it supports efforts to reduce escalation in Ukraine. However, delegates said the cartel is likely to stick to its plan of gradually increasing supply," Martin said.
Moya also noted: "Expectations for a revival of the Iran nuclear deal have come down a bit as talks still have a few key issues. Brent crude could surge to the $120 level if the oil market starts to think it is likely that sanctions will be placed on Russian energy."
"Having surged above an upward trendline, near-term resistance may be at the $118 level, while support to watch may be at the key $100 psychological level," Yeap said.