Oil Prices Soar, Nigerian Bonny Light Hits $107.77

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CEM REPORT | Russian Invasion of Ukraine has further exacerbated already strong bullishness on energy markets causing prices to soar according to the current levels bringing long term predictions closer. This is due to the general upset in supply occasioned partly by the economic sanctions imposed on Russia.

Even though the energy sector is so far exempted from the existing sanctions by major nations, Canada this week banned Russian oil imports in what amounted to little else than a symbolic move, but what Prime Minister Justin Trudeau said was a move that “sends a powerful message.” The EU, the UK, and the U.S. are clearly not done with the sanctions, and this is feeding fears that oil and gas could be next. Russia has also hinted that retaliatory energy sanctions are on the table.

This certainly has created fears of disruptions in the supply of Russian oil and gas which has expanded the bullish appetite in the market.

As predicted, all-out economic war through sanctions on major Russian banks is causing disruption to trade as flow of payment is obstructed. With this, export from Russia especially oil and gas is hampered.

Also, traders are shying away from trading Russian barrels, due to fear of possible sanctions and unpronounced sympathy for Ukraine leading to big discounts on that oil and tightening supply for other kinds of crude.

[READ ALSO] Sanctions on Russia: What Removal from Swift will Cause Global Economy

In response, prices have jumped 13.89% within 24 hrs. Brent Crude jumped from US$99.09 it sold Tuesday to US$112.97 per barrel with strong propensity for higher level before close of day trading. WTI has moved from US$97.40 on Tuesday to current US$111.34 per barrel, the highest in close to 10 years.

Bonny light on the hand throttles at US$107.77 per barrel, the highest in a decade as well and 73.8% higher than the 2022 oil benchmark of US$62 per barrel

Reuters reported yesterday that members of the International Energy Agency (IEA), which includes the United States and Japan, agreed to release 60 million barrels of crude from their reserves to try to quell the sharp increase in prices that pushed major benchmarks past $100 a barrel.

Surprisingly, the volume of 60 million barrels of crude to be released is less than one day of worldwide oil consumption. This has further magnified the market’s fear that supply will be inadequate to cover growing disruptions, hence the bullishness intensified.

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