Oil prices to hover $100 on supply disruption fear

Opec+ may sticks to output deal when it meets on May 5; China lockdowns weigh on oil demand outlook

Oil prices are likely to hover around $100 a barrel in near future due to fear of Russian supply disruption, lower demand in China and reluctance of major oil producers to increase production capacity, experts say.

Brent and US West Texas Intermediate (WTI), two international benchmarks, sustained an upward trend last month and rose 1.5 per cent and 6.4 per cent, respectively, reflecting their fifth straight monthly increases. Brent crude futures, which rose $1.99, or 1.9 per cent, to $109.58 a barrel during the intra-day trading in London ended at $109.34 a barrel on Friday while WTI rose $1.40, or 1.3 per cent, to $106.76 in late trading ended at $104.69 per barrel.

Analysts and market experts said crude prices have been buoyed by the supply disruption fears as well as increased likelihood that Germany will join other European Union member states in an embargo on Russian oil.

“There are rising concerns about the conflict disrupting more supply. The market is getting prepared for the possibility that we’re going to see more supply cut off going into the weekend,” said Phil Flynn, an analyst at Price Futures Group.

Opec+ may stick to existing deal

The Organisation of the Petroleum Exporting Countries (Opec) and allies led by Russia are expected to stick to its existing deal and agree another small output increase for June when it meets on May 5, according to Reuters.

Under a deal reached in July last year, the group is set to increase output targets by 432,000bpd every month until the end of September, to unwind its remaining production cuts. Last month, it agreed to go ahead with the planned output increase for May.

Major consumers, led by the United States, have been pressing the group to boost output at a faster pace, however, especially as Western sanctions hit Russian output.

The group, however, has been struggling to produce at its agreed targets, a trend that is likely to continue. It produced 1.45 million barrels per day below its production targets in March, data showed.

Problem is more political

— muzaffarrizvi@khaleejtimes.com