Crude oil rises to Sh12,000 as supply fears persist

Crude had hit $139 (Sh15,848) last month, its highest since 2008. [File, Standard]

 

Oil rose to $105 (Sh11,970) a barrel yesterday in volatile trade as the release of strategic reserves by consuming nations failed to eliminate supply fears arising from Russia's invasion of Ukraine and the lack of an Iranian nuclear deal.

The invasion in February heightened supply concerns that were already underpinning prices.

Sanctions imposed on Russia and buyers' avoidance of Russian oil have already led to a drop in output and raised fears of larger losses. 

"Will the release of barrels from strategic reserves fill a shortfall caused by sanctions and buyer aversion to Russian oil? In a word, no," said Stephen Brennock of oil broker PVM.

Brent crude was up 92 cents, or 0.9 per cent, at $105.31 (Sh12,000) a barrel by yesterday. US West Texas Intermediate crude gained 63 cents, or 0.6 per cent, to $99.90 (Sh11,388).

Both contracts were down more than $1 earlier in the session.

Crude dropped by about 13 per cent last week after US President Joe Biden announced a record US oil reserves release and as International Energy Agency members committed to further tapping reserves.

Crude had hit $139 (Sh15,848) last month, its highest since 2008.  

"The massive release of one million barrels per day over a period of six months in the United States alone is likely to ensure that the oil market is no longer acutely undersupplied in the second and third quarters," Commerzbank's Carsten Fritsch wrote in a report.

Oil also gained support from a pause in talks to revive the Iran nuclear deal, which would allow the lifting of sanctions on Iranian oil. Iran yesterday blamed the United States for the halt. 

Downward pressure came from a truce in Yemen, which could ease threats to supply in the Middle East.

The United Nations has brokered a two-month truce between a Saudi-led coalition and the Houthi group aligned with Iran for the first time in the seven-year conflict.

Saudi oil facilities have come under Houthi attack during the fighting.