FT. Oil prices rose more than $1 a barrel as investors, unnerved by US sanctions against Russia, ran to cover their positions ahead of the weekend. While the US sanctions gave rise to concerns about oil supply from Russia, more importantly, they raised questions on how Moscow would react and how that would affect international politics, said analysts.
"This is much more about the broader geopolitics," said Amrita Sen, chief oil strategist at consultants Energy Aspects. The global benchmark ICE May Brent rose as much as $1.32 to $107.77 a barrel, while US oil prices also rallied $1.35 to $100.25 a barrel. Despite the rise on the day, Brent was down more than 1 per cent on the week, the fourth consecutive weekly fall. Until the US announced its sanctions on Thursday, many investors had focused on weak demand for oil, especially in China. However, the announcement that the US Treasury had included Gennady Timchenko, the co-founder of oil trader Gunvor, to the list, sent jitters through the market.
Although the oil group later revealed that Mr Timchenko had sold his shares to his partner, and the US Treasury said that Gunvor would not have been subject to sanctions as long as Mr Timchenko did not own more than 50 per cent of the shares, concerns heightened about Russia-linked energy trading.
The US has its own oil, but western Europe relies on Russia for more than a third of its crude imports, according to the International Energy Agency.
"Adding Timchenko on the US sanctions list was a first step in the oil direction that is not without risk for Europe. We need to add a risk premium to oil prices as US sanctions start to get closer to Russian oil and gas," said Olivier Jakob at consultants Petromatrix.
The underlying fundamentals, however, remain bearish for the oil market.
The latest IEA report said supply from Iraq and other Opec countries had been helping to offset outages in Libya and the effect of tensions in Ukraine. Iraq's exports rose as infrastructure bottlenecks at the country's southern export terminal were finally resolved. Opec crude supplies in February had breached 30m barrels a day for the first time in five months, led by the surge in Iraqi production, it said.
On the demand side, the IEA reduced the estimates for China for the first quarter of this year, reflecting stronger-than-expected product inventory increases. Gasoil demand was relatively weak, as industrial growth eased back and less gasoil was needed to move coal across the country, said the agency.
European demand also remains subdued. OECD demand fell in January, led by Europe, due to unseasonably warm weather outside the Americas and "continued frailness of the OECD economic momentum," said the report.
Sales data released this week confirmed that view, with heating oil in Sweden for February falling 28 per cent from a year ago. Diesel demand fell 1 per cent and gasoline declined 7 per cent.
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BLOOMBERG - As Saudi Arabia led OPEC’s output cuts this year to shrink a global glut, it’s lost out on market share in the world’s biggest energy consumer. Russia in September retained the top Chinese supplier spot for the seventh straight month, while the kingdom was third.
PLATTS - The quality of Russia's key Urals crude exports towards Europe will continue to fall next year as more of the country's low-sulfur oil flows are diverted eastward to China, Russian national oil pipeline operator Transneft warned.
FT - OCI — the world’s third-largest polysilicon maker by capacity and South Korea’s biggest — this month reported a 3,373 per cent increase in operating profit to Won78.7bn ($72m) for the July-September quarter, its best performance in five years. Rival Hanwha Chemical saw third-quarter net profit jump 25 per cent to a record Won252bn.
U.S. Rig Count is up 330 rigs from last year's count of 593, with oil rigs up 273, gas rigs up 58, and miscellaneous rigs down 1 to 0. Canada Rig Count is up 41 rigs from last year's count of 174, with oil rigs up 13, gas rigs up 30, and miscellaneous rigs down 2 to 2.