Oil posted its first weekly loss since Russia invaded Ukraine and sparked one of the most tumultuous periods the market has ever experienced.
West Texas Intermediate for April delivery on Friday rose 3.12 percent to US$109.33 a barrel, but was down 5.49 percent from a week earlier.
Brent crude for May delivery gained 3.05 percent to US$112.67 a barrel, posting a weekly decline of 4.61 percent. The international benchmark settled more than US$30 off its Monday rally, which saw it surge to almost US$140.
Photo: AFP
Prices violently whipsawed over the five-day period due to a flurry of news including a US ban of Russian crude imports and the UK’s gradual phasing out of them. Much of the industry is already shunning Russian oil.
In the most recent demonstration of its pariah status, there were no buyers in a tender for crude from the country’s Far East. Nuclear talks also came to a standstill, prolonging the absence of Iranian barrels in a market desperate for additional supplies.
“Volatility is not going to disappear anytime soon,” said Tariq Zahir, managing member of the global macro program at Tyche Capital Advisors LLC.
You can see US$10 to US$15 increases at the “blink of an eye” due to a tight market and geopolitical risks, Zahir said.
The fallout from the war has rippled through commodity markets from wheat to key fuels such as gasoline and diesel. Increasing inflationary pressure around the world is forcing banks to contemplate a phase of monetary tightening that might choke off the rebound.
Rystad Energy AS has that predicted Brent could soar to an eye-watering US$240 a barrel this summer if countries continue to sanction Russian oil imports, while Goldman Sachs Group Inc said that demand destruction is the only way to buffer high prices.
“Extreme intraday volatility perhaps says something about several things: degree of uncertainty, the nature of the news flow, the spillover from some chaotic spot markets and the relatively low liquidity levels at some points,” Standard Chartered PLC head of commodities research Paul Horsnell said.
Mounting penalties against Russia have prompted fears that an already tight oil market might be stretched further, due to the absence of the country’s 5 million barrels of oil exports.
However, OPEC has said that there is no shortage, continuing its output hike of 400,000 barrels a day.
Open interest in the main oil futures contracts has plunged to a six-year low in the past few days, as traders retreat from risk. Volatility has rocketed, and exchanges have boosted margins, effectively raising the cost of buying and selling. Brent traded as high as US$139.13 a barrel this week, and as low as US$105.60.
Additional reporting by staff writer
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