New Delhi: Oil prices surged around 3% during early trade on Monday as the conflict between Russia and Ukraine continued and concerns over tightening supplies persisted.
Around 9.45 a.m., the May contract of Brent on the Intercontinental Exchange was trading at $111.07, higher by 2.91% from its previous close. The April contract of West Texas Intermediate on the NYMEX rose 3.04% to $107.88 a barrel.
Rahul Kalantri, VP Commodities, Mehta Equities said: "Crude oil prices recovered from their lows but showed weakness for second consecutive week after oil prices climbed 7% from low after the International Energy Agency said three million barrels a day (bpd) of Russian oil and products could be shut in from next month."
He also noted that delay in US-Iran deal and supply concerns from Russia could support crude oil prices at lower levels going ahead.
In its oil market report for March 2022 released last week, IEA said that Russia’s invasion of Ukraine and the eventual Western sanctions on its oil exports could mean 3 million barrels a day of Russian supply effectively cut off from global markets starting next month.
IEA said that in its report: "The prospect of large-scale disruptions to Russian oil production is threatening to create a global oil supply shock. We estimate that from April, 3 mb/d of Russian oil output could be shut in as sanctions take hold and buyers shun exports. OPEC+ is, for now, sticking to its agreement to increase supply by modest monthly amounts."
Only Saudi Arabia and the UAE hold substantial spare capacity that could immediately help offset a Russian shortfall, it added.
Earlier this month, the agency also announced that its member countries will release 61.7 million barrels of under its emergency response plan to alleviate the increasing tightness in oil markets resulting from Russia’s invasion of Ukraine.
On the other hand, the Organization of the Petroleum Exporting Countries (OPEC) in its monthly report for March also said that oil demand in 2022 faced challenges from Russia's invasion of Ukraine and rising inflation. However, the cartel did not change its forecast for robust demand this year. The carter stuck to its estimate that world oil demand would rise by 4.15 million barrels per day (bpd) in 2022.
The report further said the war in Ukraine and continued concerns about Covid-19 were reshaping the world economy, which would have a negative impact on global growth in the short term.
Apart from decline in few sessions last week by and large crude prices have been largely on the upside in the past couple of months amid the Russia-Ukraine crisis and the volatility intensified after Russian invaded Ukraine.
On March 7, Brent had touched $139.13 per barrel, the highest since 2008. Prices started easing on March 9, after the United Arab Emirates (UAE) said that it was in favour of higher production by OPEC. Crude prices then declined for around five sessions in a row over hopes of ceasefire talks between Russia and Ukraine and concerns of falling demand amid fresh Covid restrictions in China.
The retail fuel prices, however, have remained unchanged despite the surge in crude prices. On Monday, the retail price of petrol was unchanged at ₹95.41 a litre, while diesel was sold for ₹86.67 per litre in the national capital.
Although the increase in crude oil prices has not been transferred to consumers of petrol and diesel so far, oil marketing companies raised jet fuel prices by a steep 18% on Wednesday. In a first, aviation turbine fuel (ATF) prices are now above the ₹1 lakh per kilolitre mark.
