NextGen Day

NEW YORK – Oil prices rose further on Wednesday, as major oil producers agreed to maintain moderate output increases in the face of supply concerns arising from the Russia-Ukraine war.

On the New York Mercantile Exchange, the West Texas Intermediate (WTI) for April delivery rose 7.19 dollars, or 7%, to settle at 110.60 dollars a barrel, the highest close since 2011.

On the London ICE Futures Exchange, Brent crude for May delivery rose 7.96 dollars, or 7.6%, to settle at $112.93 per barrel, the highest level since 2014.

On Wednesday, the Organization of Petroleum Exporting Countries (OPEC) and its partners, known as OPEC+, agreed that they will stick to their previously announced intentions for a slight rise in oil output of 400,000 barrels per day in April.

In a statement released following the 26th OPEC and non-OPEC Ministerial Meeting, the oil alliance stated that the current volatility in the oil market is due to geopolitical developments rather than changes in market fundamentals.

Meanwhile, statistics revealed a decline in US fuel stockpiles, giving prices some support.

The US Energy Information Administration (EIA) reported on Wednesday that commercial crude oil stocks fell by 2.6 million barrels during the week ending February 25.

Last week, total motor gasoline stockpiles fell by 0.5 million barrels, while distillate fuel inventories fell by 0.6 million barrels, according to the EIA.

Oil prices have risen to multi-year highs in recent days, as fears of energy supply disruptions from key exporter Russia have grown as a result of the ongoing Russia-Ukraine war and far-reaching Western sanctions against Moscow.

The International Energy Agency stated on Tuesday that its member countries have decided to transfer 60 million barrels of oil from their emergency stockpiles to help alleviate any supply disruptions caused by the Russia-Ukraine war.

The announcement, however, did not calm markets, with WTI and Brent jumping 8% and almost 7.2 percent for Tuesday, respectively.

“This is due to the fact that the quantity to be released would only cover two weeks of Russian oil supplies,” Carsten Fritsch, an energy analyst at Commerzbank Research, wrote in a report on Wednesday.

Russia shipped 4.6 million barrels per day on average in January and February, according to the Interfax news agency.

“If the lion’s share of this disappears, it will be difficult to locate sufficient replacement suppliers,” Fritsch said, adding that “the market looks to be progressively pricing in a Russian oil supplies outage.”

Energy prices, experts said, will be a critical issue to watch as events unfold, warning that increasing commodity prices might have a negative influence on economic growth at a time when the world is still recuperating from the impact of the coronavirus disease 2019 (Covid-19) pandemic.

“We believe now is the moment for investors to be more careful, consider portfolio hedging, and seek longer-term opportunities against a backdrop of heightened uncertainty,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.

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