Will we soon see another oil price outbreak?

With Russia’s invasion of Ukraine, which appears to be turning into a prolonged war of attrition in eastern Ukraine, the unrest in the oil supply market has cooled considerably. It also seems that recent SPR releases – haphazardly rejected by many experts as just a patch – have the desired effect. The oil price bull run has hit the slides after President Biden announced that the United States would release 180 million. barrels from the strategic petroleum reserve over the next six months in the largest release in SPR’s history, while threatening to impose penalties on domestic drillers for non-use. federal oil permits. The International Energy Agency’s 31 member states plan to release 120 million barrels from their emergency oil reserves, including 60 million barrels from a previously announced extraction from US stocks, marking the second coordinated release of emergency oil from the IEA in just over a month.

Front-month Brent has not managed to achieve a run of two consecutive days with higher settlements in the last three weeks and has only managed a higher intra-day high of two days during the last two weeks. Front-month Brent settled at $ 98.48 per. barrel on April 11, aw / w fall of USD 9.05 / barrel and only USD 1.64 / barrel higher than on February 23, the day before Russia invaded Ukraine, while WTI fell USD 8.99 / barrel m / w to settle at $ 94.29 / barrel on April 11th.

There are still oil sanctions

In an earlier oil price update released a few weeks ago, commodity experts at Standard Chartered had warned that the market could will soon face a supply deficit of 3 MB / d partly due to self-sanctions and also due to the possibility of a ban on imports of Russian oil. It certainly proved within the realm of opportunity given the global outrage that followed grim images emerged from the city of Bucha near Kiev, including a mass grave and bound corpses of people shot at close range.

Related: China and the United States are fighting for influence over Iraqi oil

But StanChart has now downplayed its bullish outlook a bit. Experts now say that while sanctions against Russian oil are likely to remain at the top of the EU’s political agenda in the coming months, a complete ban is unlikely.

StanChart rather says that the EU is likely to consider various intermediate measures, including tariffs and the use of blocked funds, in such a way that Russia is unable to access all its exports income.

Still, experts apparently can not agree on the Russian outlook.

StanChart has predicted an annual drop in the annual average of 1.61 mb / d, which is good for a 3 mb / d sequential drop from pre-invasion levels; The IEA expects Russia’s crude oil production to fall by 1.65 mb / d, the EIA expects growth of 56 kb / d, the OPEC Secretariat has revised Russian production lower by 530 kb / d, although it still predicts an increase of 433b / d , lower than OPEC + production cut the settlement plan.

The latest weekly EIA data was slightly bullish. Crude oil inventories rose 2.42 mb to 412.37 mb, leaving them 85.94 mb lower y / y and 66.24 mb below the five-year average. The P / E change in the crude oil balance was 493 kb / d in the direction of lower stocks, mainly due to an increase of 705 kb / d in the export of crude oil; however, this was more than offset by a 1,332mb / dw / w swing in the crude oil adjustment period towards higher stocks. The EIA’s estimate for the US crude oil supply rose 0.1 mb / dw / w to 11.8 mb / d. The EIA forecast is that crude oil production will average 12 mb / d in July 2022 and will move above 13 mb / t in August 2023 to the highest level ever (the current monthly average of 12,966 mb / d was set in November 2019) . Related: Russia ready to sell oil at any price

The American Petroleum Institute (API) reported that crude oil inventories increased by 7.8 mb, compared to the DOE’s expectation of a build-up of 0.9 mb per week. Cushing’s crude oil stocks rose 0.4 MB per week, according to the API. API reported petrol stocks fell 5.1 mb, compared to the DOE expectation of a 0.4 mb draw. API reported diesel stocks fell 5.0 mb, compared to the DOE’s expectation of a 0.5 mb draw. In total, the API showed a pull of 2.3 mb in oil and oil products on the week, compared to the DOE expectation for weekly stocks. The API numbers are bullish relative to DOE expectations.

Meanwhile, drilling activity in the U.S. shale fields is gradually picking up.

The U.S. oil rig number rose 13 w / w to its two-year high of 546, according to the latest

Baker-Hughes study. The number of oil platforms has added 51 over the last 10 weeks compared to 34 over the previous 10 weeks. Texas accounted for most of the recent w / w increase in oil drilling activity, with nationwide drilling of oil platforms increasing by 10 w / w to 305. Among the Permian sub-basins

Delaware Basin activity increased by two to 169 rigs, Midland Basin activity increased by six to 131 rigs, and other activity in Perm increased by a single rig to 30 rigs. The number of gas rigs in the United States increased by three w / w to a 29-month high of 141, with the number of gas platforms at the Haynesville field reaching a nine-year high of 70 rigs.

By Alex Kimani for Oilprice.com

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