Oil Prices Inch Higher
Oil prices rose slightly on Wednesday ahead of reports on U.S. oil stockpiles, with crude futures boosted by tight supply and increasing gasoline demand as China’s leading cities eased COVID-19 limitations.
Brent oil futures increased 22 cents, or 0.2 percent, to $120.79 a barrel by 0012 GMT, after reaching their highest level since May 31 on Tuesday.
The U.S. West Texas Intermediate crude price was $119.65 per barrel, up 24 cents, or 0.2 percent; it rose from its highest closing since March 8 on Tuesday.
Analysts surveyed by Reuters forecast another fall in U.S. crude inventories in last week’s data. However, gasoline and distillates stocks may rise. However, according to the American Petroleum Institute, crude and oil product stockpiles in the United States increased last week. The Energy Information Administration (EIA) of the United States issued a study on Wednesday.
Global crude and oil product supplies remain tight, pushing Asian refiners’ diesel margins to new highs as Western sanctions limit Russia’s exports.
According to the CEO of global commodities trader Trafigura, oil prices might soon reach $150 per barrel; moreover, it might rise even more this year, with demand destruction expected by the end of the year.
Most refineries worldwide are already nearing capacity to satisfy increased demand from pandemic recovery and replace lost Russian supplies. According to JP Morgan analysts, Russia has reduced its oil product exports by 500,000 to 700,000 barrels per day. It has been more difficult for Moscow to market its fuel than crude.
Russia Could Replicate Iran’s Strategy to Skirt Oil Sanctions
According to comments made last week by European Council President Charles Michel, the European Union’s (E.U.) ban on Russian oil imports by sea will affect approximately 75 percent of Russia’s crude oil delivery to the bloc in the first instance, rising to roughly 90 percent by the end of this year. Fortunately for the Kremlin, as Iran has proved during more than 40 years of sanctions, there are multiple good smuggling options accessible to Russia.
The primary idea entails rebranding Iranian oil as oil from Iraq; which remains unofficial primarily as an oil-exporting counter; then transporting it freely to anywhere Iraq desires. One of the most basic ways is to disable – literally by flipping a switch; the ‘automatic identification system’ on ships carrying Iranian oil and lying about destinations in shipping papers.
The essential issue for Russia currently in all of this is not Iran’s sanctions-evading networks to get crude oil to China – Moscow has this covered, as OilPrice.com has extensively explored – but Iran’s networks to move the oil into Europe. According to E.U. estimates, the prohibitions will affect approximately 2.3 million BPD of Russian crude imports within six months and another 1.2 million BPD of refined product imports by the year. All of Iran’s existing techniques of evading sanctions are available to Russia, including the nearly always successful ones involving Iraq. There are indicators that Iraq may be able to open up even more direct pathways for crude oil; reportedly beginning its journey.
Norwegian Offshore Oil and Gas Workers Plan Strike Action
If state-brokered wage mediation fails, more than one in ten Norwegian offshore oil and gas workers plan to strike on Sunday.
According to trade unions Industri Energi, Lederne, and Safe, a walkout by 845 of Norway’s about 7,500 offshore oil and gas production workers would impair only a small portion of oil output while leaving gas supplies undisturbed at first.
Given the existing scenario in Europe, a strike would have no immediate impact on Norway’s gas supplies.
Workers request above-inflation pay increases and other contract revisions but have not made their requests public. The unions said a strike would affect ten permanent offshore sites; including the Njord A, Valhall, Gudrun, Oseberg East, and Oseberg South, and three mobile service units.
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