ISLAMABAD: Crude oil futures rallied for the second week to their highest level since March and surged up to 6.11 percent amid consistent supply concerns due to looming European ban on Russian oil and expectations of higher demand in the US as the summer season looms.
Brent, the international benchmark for two-thirds of the world’s oil, surged for the second week in a row. Brent price increased by $6.88 (+6.11 percent) to $119.43 from $112.55 on a week-on-week (WoW) basis. The West Texas Intermediate (WTI), the main oil benchmark for North America, went up by $4.79 a barrel (+4.34 percent) to $115.07 from $110.28 on a weekly basis, after inching down in the preceding week.
The price for Opec Basket increased for the second week in a row from $112.04 to $116.50 on a week-on-week basis, showing an increase of $4.46 (+3.98 percent). The OPEC Reference Basket of Crudes (ORB) is made up of Saharan Blend, Girassol, Djeno, Zafiro, Rabi Light, Iran Heavy, Basra Light, Kuwait Export, Es Sider, Bonny Light, Arab Light, Murban and Merey.
The price of Russian Sokol increased for the second consecutive week by $4.64 (+4.69 percent) to $103.56 from $98.92 on WoW basis. Similarly, Arab Light prices witnessed an increase for the second straight week and surged by $4.49 (+4.10 percent) to reach $113.91 from $109.42 a barrel on a weekly basis.
The oil prices closed the week with gains ahead of the US Memorial Day holiday weekend, which is the peak US demand season, and as European nations negotiate over whether to impose an outright ban on Russian crude oil.
The prices also drew support from strong worldwide demand for fuel. The US driving season and strong travel demand helped prices to rally, as supply growth lags demand growth, the oil market is likely to stay undersupplied, which will help prices to rise in near-term.
On the other hand, the European Union countries are negotiating a deal on Russian oil sanctions that would embargo shipment deliveries but delay sanctions on oil delivered by pipeline to win over Hungary and other landlocked member states.
Hungary’s resistance to oil sanctions and reluctance of other countries have held up implementation of a sixth package of sanctions by the 27-member EU against Russia following its invasion of Ukraine. The EU government envoys could reach an agreement in Brussels on Sunday in time for leaders to endorse it at their May 30-31 summit.
The easing of the coronavirus pandemic restrictions in China, the world’s largest importer of oil, is also supporting crude prices. Shanghai, the country’s commercial centre, plans to reopen shopping centres and shops from June 1.
Opec+, which meets this week, is expected to stick to plans to raise production by only 432,000 barrels a day, providing another supportive factor in a tight market.
Oil prices have gained more than 60 percent since last year on supply concerns and improved demand as global economies recover from the coronavirus pandemic. Brent traded close to $140 a barrel in March after Russia’s military offensive in Ukraine, before falling back due to renewed Covid-19 lockdowns in China and the release of oil reserves by International Energy Agency member countries.
