HOUSTON: Prices of oil went up more than one percent Friday and are set to rise for a second consecutive week. Despite worries about global economic growth, the impending European Union sanctions on Russian oil have sparked hope that we’ll have a tighter supply.
Brent futures rose 1.3% to $112.31, and US West Texas Intermediate (WTI) crude climbed 1.4% to $109.77 per barrel.
Many are scared of an economic slowdown if oil prices go up in the future. Right now, the fundamentals for oil prices are bullish because demand is increasing.
After the EU set an embargo on Russian oil, WTI (West Texas Intermediate) and Brent are up about 4% and 6%, respectively.
The proposed sanctions include phasing out imports of refined Russian products by the end of 2022 including banning all shipping and insurance services for transporting Russian oil.
The EU is planning new sanctions to back its plan. These have to have unanimous backing from all 27 countries alike, but it is unclear if there will be support.
Stephen Brennock, an analyst with PVM, believes that the looming embargo on Russian oil will have an acute supply squeeze. This will be compounded by OPEC+, which is unhappy with rising energy prices.
Opec and its allies were mad that the West was not listening to their request for more oil production. They stuck with their plan for new oil production, even after threats from Western nations.
Analysts predict that the group’s production will rise little because of supply constraints.
According to Senior Market Analyst Asia Pacific at OANDA, Jeffrey Halley, there is no chance members of the Organization of African States will meet production quotas because of production problems in other African countries.
The US Senate is considering a bill that could allow lawsuits on Opec+ for allegedly creating an artificial price hike.
The US oil rig count is the highest it was in April 2020. The number rose from 557 to 563 this week, indicating an increase in the upcoming production.
Investors are watching the demand in the US this fall as they believe that Americans will need to buy more fuel. Because the United States has said that it will purchase 60 million barrels of crude oil for its stockpiles.
Demand concerns capped the oil price rise
The Bank of England has cautioned that Britain risks a recession and inflation above 10% as interest rates were raised to their highest since 2009 by a quarter of a percentage point.
With China instituting Covid-19 restrictions, it may face risks in the second quarter of this year.
Beijing authorities will close any non-essential services in its biggest district, Chaoyang. This is part of the latest crackdown on individuals and organizations.