Tight supply expected – May 01, 2022

Alaska North Slope crude rose 2 cents on April 27 to close at $109.69 a barrel. West Texas Intermediate jumped 32 cents to close at $102.02 and Brent gained 33 cents to close at $105.32.

The day’s modest gains belied the choppy week of trading that preceded it.

ANS rose $2.93 on April 26 to close at $109.68, while WTI jumped $3.16 to close at $101.70 and Brent rose $2.67 to close at $101.70. close at $104.99.

ANS fell $3.58 on April 25 to close at $1.06.74, as WTI slid $3.53 to close at $98.54 and Brent plunged $4.33 to close at $102.32.

On April 22, ANS fell $1.87 to close at $110.33, WTI fell $1.72 to close at $102.07, and Brent fell $1.68 to close at $106.65.

ANS gained $1.60 on April 21 to close at $112.20, while WTI rose $1.04 to close at $103.79 and Brent rose $1.53 to close at 108 $.33.

For all moves for the week, on April 27, ANS was only down 91 cents from its Wednesday April 20 close at $110.60, WTI was down 73 cents from its close April 20 at $102.75 and Brent was down $1.48 from its April 20 close. $106.80.

April 20 prices were lower than the previous Wednesday, April 13. ANS fell $1.75 on the week, WTI fell $1.50 and Brent fell $1.98.

Over the two weeks, supply issues continued to drive prices above the $100 mark, while demand concerns over China’s COVID-19 lockdowns stifled any move up. Lower average 100 dollars.

Russian production will fall

Supply fears have been stoked by a report from the Russian Economy Ministry that Russian oil production could fall by 17% in 2022.

Russian oil production could fall to between 433.8 million and 475.3 million tonnes – between 8.68 million and 9.5 million barrels per day – in 2022 from 524 million tonnes in 2021, according to the report seen by Reuters on April 27.

Russia’s production has not been this low since 2003, when its output was 421 million tonnes. It would be the worst Russian production crash in more than 30 years.

With the collapse of communism, Russian oil production in 1991 fell 9.5% from 1990 levels and 17.7% from the 1988 peak.

The current contraction comes as the United States banned imports of Russian oil after Vladimir Putin attacked Ukraine. The European Union is heading for its own full-scale embargo.

According to the International Energy Agency, the full repercussions of Western sanctions against Russia will not be fully felt until May.

Russian oil production began its decline in March and by mid-April had already fallen by 7.5%, according to Reuters.

Oil and gas exports in 2022 are also expected to fall, falling to between 213.3 million and 228.3 million tonnes (4.27 million to 4.57 million bpd) from 231 million tonnes in 2021, the report said. .

Production shutdowns in Libya due to the unrest are also stoking concerns about tight oil supplies.

OPEC+ no panacea

The Organization of the Petroleum Exporting Countries and allied producing countries have struggled to meet production increase targets to reverse production cuts undertaken in April 2020 in response to the coronavirus pandemic.

OPEC+ produced 1.45 million bpd below its output target in March as Russian production began to decline, data showed, according to an April 28 Reuters report.

European Union officials held talks on April 11 in Vienna, Austria, with OPEC officials calling on the group to increase production and as the EU considers potential sanctions against Russian oil.

“We could see the loss of more than 7 million barrels per day of Russian oil and other liquids exports, resulting from current and future sanctions, or other voluntary actions,” said the Secretary General of the OPEC, Mohammad Barkindo, according to a copy of his speech seen by Reuters.

“Given the current demand outlook, it would be almost impossible to replace a loss of volumes of this magnitude.”

The World Bank said most of the spare capacity is held by OPEC countries, including Saudi Arabia (2 million bpd), the United Arab Emirates (1.1 million bpd) and Iraq ( 0.6 million bpd).

“So far, OPEC+ countries have been reluctant to ramp up production faster than previously announced, and the group as a whole is producing well below the agreed target, suggesting perhaps the group’s spare capacity could be lower than estimated,” the World Bank said. said in its April Commodities Market Outlook.

Other potential sources of oil are Iran and Venezuela – both currently under US sanctions, he said.

“A new nuclear deal with the former could potentially bring around 1 million bpd of additional oil to the world market within six months, however, in the case of the latter, the chronic deterioration of its oil industry suggests that a significant increase in oil production and would require significant new investment,” the World Bank said.

Increasing U.S. shale production beyond the projected 2022 growth of 1.4 million bpd would be difficult given capacity constraints from skilled labor shortages as well as shortages of physical inputs such as sand, the bank said, adding that incremental production increases in other producers, such as Brazil or Canada, will require significant investment and time.

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