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Oil Extends Rally After US Bans Russian Imports, Prompting Supply Fears

An oil pump is seen at sunset outside Vaudoy-en-Brie, near Paris, France April 23, 2018. REUTERS/Christian Hartmann
An oil pump is seen at sunset outside Vaudoy-en-Brie, near Paris, France April 23, 2018. REUTERS/Christian Hartmann
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Oil Extends Rally After US Bans Russian Imports, Prompting Supply Fears

An oil pump is seen at sunset outside Vaudoy-en-Brie, near Paris, France April 23, 2018. REUTERS/Christian Hartmann
An oil pump is seen at sunset outside Vaudoy-en-Brie, near Paris, France April 23, 2018. REUTERS/Christian Hartmann

Oil prices rose on Wednesday as the US ban on Russian oil imports and Britain's plan to phase them out by year end raised concerns of tighter global supply.

Brent crude futures were up $2.17, or 1.7%, at $130.15 a barrel at 0133 GMT, after jumping 3.9% the previous day.

US West Texas Intermediate (WTI) crude futures were up $1.57, or 1.3%, at $125.27 a barrel, after also surging 3.6% on Tuesday.

US President Joe Biden on Tuesday imposed an immediate ban on Russian oil and other energy imports and Britain said it would phase out Russian oil imports through the end of 2022.

Oil prices have surged more than 30% since Russia, the world's second-largest crude exporter, invaded Ukraine.

Fears of further disruptions to oil supply amid escalating sanctions on Moscow has boosted buying, Reuters quoted analysts as saying.

"On top of the US and Britain's announcement effects, fears of further disruptions of supply from Russia due to intensifying sanctions on Moscow prompted fresh buying," said Hiroyuki Kikukawa, general manager of research at Nissan Securities.

"But Monday's highs will likely become a ceiling for the short term as speculative buying is expected to slow down soon and countries in the northern hemisphere are headed to spring when fuel demand drops," he said.

Oil prices jumped on Monday to their highest levels since July 2008, with Brent hitting $139.13 a barrel and WTI $130.50.

Behind the rally was also expectations that an imminent return of Iranian crude to global markets was unlikely, as talks on Iran's nuclear program have slowed between Tehran and world powers.

Analysts at Oslo-based consultancy Rystad Energy said on Tuesday that global oil prices could rise to $200 a barrel if Europe and the United States ban imports of Russian oil.

Still, oil prices running at their hottest level in 14 years are poised to cut post-COVID pandemic fuel demand as consumers react to surging pump and power prices by pulling back on spending and travel, top energy executives warned on Monday.

US crude stocks rose by 2.8 million barrels for the week ended March 4, against analysts' forecast of a drop, but gasoline and distillate stocks fell, according to market sources citing American Petroleum Institute figures on Tuesday.

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Saudi Arabia Sees Highest Level of Non-oil Private Sector Activity in 4 Months

The 1.5-point increase in the PMI reflects a larger expansion in both output and new orders. (Asharq Al-Awsat)
The 1.5-point increase in the PMI reflects a larger expansion in both output and new orders. (Asharq Al-Awsat)
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Saudi Arabia Sees Highest Level of Non-oil Private Sector Activity in 4 Months

The 1.5-point increase in the PMI reflects a larger expansion in both output and new orders. (Asharq Al-Awsat)
The 1.5-point increase in the PMI reflects a larger expansion in both output and new orders. (Asharq Al-Awsat)

Business activity in Saudi Arabia's non-oil sector accelerated to a four-month high in September, driven by strong demand, which led to faster growth in new orders. The Riyad Bank Saudi Arabia Purchasing Managers' Index (PMI), adjusted for seasonal factors, rose to 56.3 points from 54.8 in August, marking the highest reading since May and further distancing itself from the 50.0 level that indicates growth.

The 1.5-point increase in the PMI reflects a larger expansion in both output and new orders, alongside challenges in supply. The improvement in business conditions contributed to a significant rise in employment opportunities, although difficulties in finding skilled workers led to a shortage in production capacity.

At the same time, concerns over increasing competition caused a decline in future output expectations. According to the PMI statement, inventories of production inputs remained in good condition, which encouraged some companies to reduce their purchasing efforts.

Growth was strong overall and widespread across all non-oil sectors under study. Dr. Naif Al-Ghaith, Senior Economist at Riyad Bank, said that the rise in Saudi Arabia's PMI points to a notable acceleration in the growth of the non-oil private sector, primarily driven by increased production and new orders, reflecting the sector’s expansionary activity.

Al-Ghaith added that companies responded to the rise in domestic demand, which plays a crucial role in reducing the Kingdom's reliance on oil revenues. The upward trend also indicates improved business confidence, pointing to a healthy environment for increased investment, job creation, and overall economic stability.

He emphasized that this growth in the non-oil sector is particularly important given the current context of reduced oil production and falling global oil prices. With oil revenues under pressure, the strong performance of the non-oil private sector acts as a buffer, helping mitigate the potential impact on the country's economic conditions.

Al-Ghaith continued, noting that diversifying income sources is essential to maintaining growth amid the volatility of oil markets. He explained that increased production levels not only enhance the competitiveness of Saudi companies but also encourage developments aimed at expanding the private sector's participation in the economy.

This shift, he said, provides a more stable foundation for long-term growth, making the economy less susceptible to oil price fluctuations.