Oil posted its first back-to-back weekly decline since December last year as intense volatility and geopolitical risks continued to upend markets.
Futures in New York fell 4.2 percent for the five-day period to settle at US$104.70 after swinging by more than US$16 a barrel throughout the week.
West Texas Intermediate crude oil for April delivery on Friday rose US$1.72 to US$104.70 a barrel on Friday, falling 4.23 percent from a week earlier.
Photo: AP
Brent crude for May delivery on Friday rose US$1.29 to US$107.93 a barrel, down 4.2 percent weekly.
The price gyrations have followed rapid developments surrounding the war in Ukraine, exacerbating volatility amid supply concerns and conflicting news in peace talks that sent oil surging by the most in 16 months Thursday.
The International Energy Agency (IEA) on Friday said that oil markets are in an “emergency situation” that could get worse, days after stating that the potential loss of Russian oil exports “cannot be understated” in its monthly report.
Fundamentally, oil markets remain tight, but “until we get some resolution on what Russia’s ultimate goal here is, you’re going to have a lot of sentiment and a lot of volatility in oil prices,” said Rob Thummel, portfolio manager at Tortoise, a firm that manages about US$8 billion in energy-related assets.
There is at least US$20 of geopolitical premium priced in, he added.
A renewed COVID-19 outbreak in China has compounded the moves, as the country imposes some of its heaviest virus-related restrictions since early 2020.
Chinese President Xi Jinping (習近平) pledged to reduce the economic impact of his virus-fighting measures, signaling a shift in a long-standing strategy that has minimized fatalities, but weighed heavily on the world’s second-largest economy.
The rise in oil prices, along with other commodities exported by Russia, has also fanned inflation fears as governments try to encourage growth after the pandemic.
The US Federal Reserve this week raised interest rates and signaled further hikes to tackle the fastest price gains in four decades.
The IEA earlier this week said that Russia’s oil output could slump by about one-quarter next month, inflicting the biggest supply shock in decades as buyers shun the nation’s exports.
On Friday, the agency said advanced economies could curb their oil demand by reducing speed limits and using public transport to ease potential strains on the market.
Russian crude is still being treated with extreme caution by buyers worried about damage to their reputation or falling foul of sanctions. Since the invasion of Ukraine, the lion’s share of oil refining companies across Europe have said they will scale back purchases from Moscow.
One of the most volatile corners of the oil market has been diesel, partly because Russia is a major exporter to the rest of Europe. Open interest — the number of contracts outstanding in Europe’s main diesel contract — has fallen by more than half from its high last year, as traders take fright at the volatility.
Additional reporting by AP
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