Oil prices have fallen to levels that don’t reflect the risk of disruptions to Russian exports or the ability of China to keep the coronavirus pandemic under control, according to the world’s biggest independent crude trader.
While Brent surged to almost $140 a barrel soon after Russia’s attack on Ukraine in late February, it sunk 13% last week to around $104.
That was due to the United States announcing an unprecedented release of strategic reserves to tame fuel prices and virus cases rising in China.
“Oil feels cheaper than most would’ve predicted,” Mike Muller, Vitol Group’s head of Asia, said Sunday.
“Oil prices could be higher given the risk of disruption of supplies from Russia. But people are still lost figuring out those numbers.”
Muller noted that flows of Russian crude and oil products may be down by between one and three million barrels a day through the third quarter. The country normally exports around 7.5 million barrels every day.
In this context, the International Energy Agency followed suit and agreed on April 1 to a second emergency release of oil reserves in response to “market turmoil” caused by Russia's invasion of Ukraine, without specifying volumes.
The announcement showed IEA member states’ “strong and unified commitment to stabilizing global energy markets,” the Paris-based group of 31 industrialized nations but not Russia said in a statement following an emergency meeting.
The agreement follows the previous action taken by IEA member states, announced last month, to which they pledged a total of 62.7 million barrels. They hold emergency stockpiles of 1.5 billion barrels.
The prospect of large-scale disruptions to Russian oil production is threatening to create a global oil supply shock, the agency warned.
It pointed out that Russia’s war in Ukraine continues to put significant strains on global oil markets, resulting in heightened price volatility.
Its governing board recommended that governments and consumers maintain and intensify conservation efforts and energy savings.
Russia’s oil and gas condensate production fell to 11.01 million barrels per day (bpd) in March, from an average output of 11.08 bpd in February, two industry sources familiar with the data told Reuters on Friday.
On March 31, the output was down to 10.6 million bpd, the lowest daily level since September 2021, the sources said and Refinitiv Eikon data showed.
Fall in Russia’s oil output happens along with disruptions with the state’s oil and product exports as European costumers turned cautious of trading with the state due to Western sanctions.
Russian oil output is falling in time when OPEC+ deal offers the state to rise its output monthly.
Urals oil loading from Russia’s Baltic ports fell five percent behind the schedule for March due to cargoes cancellations.
India stepped up as one of major buyers of Russian oil after Western sanctions were imposed.
