Crude oil prices were on course for another weekly gain today, despite a temporary dip following the announcement of a 30-day sanction waiver on Russian crude stuck on tankers as the Trump administration tries to alleviate an increasingly serious-looking supply tightening.
Brent crude was trading at $100.2 per barrel at the time of writing, and West Texas Intermediate was trading at $95.03, both slightly down on Thursday’s close but higher on the start of the week.
Washington’s sanction waiver follows an admission by the International Energy Agency that “The war in the Middle East is creating the largest supply disruption in the history of the global oil market.” The admission came a week after IEA’s head, Fatih Birol, claimed the market was well supplied. “Today, there is plenty of oil in the market. I repeat: there is plenty of oil in the market,” Birol said a week ago.
The admission about the gravity of the supply situation was accompanied by the announcement that the IEA will release a total of 400 million barrels of crude to cushion the oil shortage blow to the global economy. This is the highest volume of emergency oil releases in history.
The United States said it would contribute 172 million barrels of that total, reversing an earlier position that said it had no plans to tap the strategic petroleum reserve to fill any global supply gaps. Some are worried about this reversal since the SPR is at a historic low in terms of reserves, raising questions about future oil demand when the worst of the crisis is over, and storage needs to be refilled.
Yet even the news of such significant emergency releases was not enough to calm traders as the United States, Israel, and Iran continued fighting, with no sign of any chance that the war could be brought to a swift end in sight.
“ICE Brent futures have already breached $100 per barrel and are still supported today, despite moves to calm the markets with the Russian oil waiver and the unprecedented release of emergency stockpiles,” LSEG analyst Emril Jamil told Reuters.
“The market sees this as a short-term solution that does not address the crux of the supply disruption. The crude intermonth spreads for future months indicate an unresolved and continued tightness in supply,” the analyst added.
By Irina Slav for Oilprice.com
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