KUALA LUMPUR – Sanctions on Russia will have an adverse implication to the global oil market as the country accounts for more than 10% of the global oil supply.
Maybank Investment Bank (Maybank 1B) said a coordinated Strategic Petroleum Reserve (SPR) by the United States (US) and its allies, as well as the very likelihood of the US-Iran nuclear agreement would ease the upside in the short-term.
“That is not a long-term solution to the market. Iran is a sentiment booster for the short-term and is not the answer to the demand-supply mismatch. It will likely face difficulty to provide additional output due to the severe under-investment from sanctions in the past,” it said in a research note recently.
Reports said the US and its European allies are exploring banning imports of Russian oil.
Crude oil prices are now at their highest since 2008, touching briefly US$139 per barrel.
Maybank IB said the rising geopolitical landscape, namely the Russia-Ukraine crisis, would exacerbate the situation further and this would see oil prices at higher and volatile levels.
At the time of writing, oil prices have pare down gains with Brent crude standing at US$128.20 per barrel, while West Texas Intermediate was at US$124.20 per barrel.
Crude oil price (dated Brent) surpassed US$100 per barrel in February 2022 and reached a high of US$124 per barrel recently to average US$93 per barrel year-to date.
Meanwhile, SPI Asset Management managing partner Stephen Innes said the market was pricing out Russian oil supply amid the US and European Union embargo while pricing in Iran supply but the loss of Russian oil exceeds the upside from Iran.
“Why it is difficult to calculate a top because Russian oil will find its way to the China’s market and lessening demand from the Middle East. But you do not cut off the world’s second-largest oil supplier and expect oil importers to sit idle, especially with shale producers not ramping up.
“The US should be okay as they can import more heavy grades from Canada for short-term until shale production fills the void. Europe imports 4.3 million barrels per day, so that is the issue;’ he told Bernama.
– BERNAMA
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