Prices rise on fears of war in Ukraine

Just as oil prices looked set for their first weekly decline after seven consecutive rises, they rose sharply on Friday evening after a US official said that a Russian attack on Ukraine could happen very quickly. Many countries, like the US, have asked their citizens to leave Ukraine. The price of Brent 1st-nearby rose above $96/b overnight. Of course, the backwardation of the curve has strengthened further: there is almost $2/b between the April and May contracts.

Short-term market fundamentals would suggest a little moderation on prices: the feedback from the Iranian nuclear talks is positive and the increase in the number of active oil wells in the US has never been as strong in 4 years as it was last week: +19 to 516. But the IEA’s upward revisions to its estimates of global demand over the past few years (nearly 3 billion additional barrels) mean that crude stocks are already back down to pre-pandemic levels and the market is therefore extremely tight. Pending the return of Iranian oil to the market, and even if tensions ease with Russia, the risk of Brent crude prices rising above $100/b are very real.