Oil edged lower on Friday but posted gains for the fifth month in a row on supply concerns due to Russia’s military offensive in Ukraine and the growing possibility of European sanctions on Moscow’s energy exports.
Brent, the global benchmark for two thirds of the world's oil, settled 0.11 per cent lower at $107.10 a barrel at the close of trading on Friday. West Texas Intermediate, the gauge that tracks US crude, closed down 0.64 per cent at $104.70 a barrel.
Both Brent and WTI rose for the week and posted their fifth straight monthly gain, with Brent ending the month 1.3 per cent higher and WTI surging 4.4 per cent during the period.
There is an increased possibility of Germany joining other EU nations in imposing sanctions on Russian oil exports as Moscow's military offensive in Ukraine continues.
Germany’s Economy Minister Robert Habeck has said the country can cope with an EU embargo on Russian oil imports. Europe’s biggest economy is hoping to find alternative sources of supply soon.
The EU's move to consider sanctions on Russian imports comes after Russia halted natural gas supplies to Poland and Bulgaria last week.
The bloc has accused Russia of weaponising its energy supply.
Russia is the world's second-largest energy exporter. It accounts for about 10 per cent of the world’s energy output, including 17 per cent of its natural gas and 12 per cent of its oil. The US and UK have already banned Russian oil imports.
From May onwards, close to 3 million barrels per day of Russian production could be offline due to international sanctions and the widening of customer-driven embargo comes into full force, according to the International Energy Agency.
Oil markets are having a “wax-on, wax-off” week as they bounce between China slowdown fears and European energy bans, said Jeffrey Halley, a senior market analyst for the Asia-Pacific region at Oanda.
“I believe there has been far too much complacency of late around the risks associated with either Russia or Europe imposing respective energy bans, or developments in the Ukraine war.”
Although there are signs of a significant shift in Europe, “markets remain in a holding pattern until a clear policy response from the EU emerges with respect to their stance on importing Russian oil”, said Daniel Richards, Mena economist at Emirates NBD.
Oil prices declined in recent weeks amid concerns about the demand outlook and co-ordinated efforts by the US and the International Energy Agency to improve supply.
Crude prices, which rose close to $140 a barrel in March on developments related to the Ukraine conflict, have given up most gains.
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Ukrainian President Volodymyr Zelenskyy and US Speaker of the House Nancy Pelosi shake hands as they meet in Kyiv. AP -
Floodwater edges towards homes in the small Ukrainian town of Demydiv. AFP -
Lila stands inside her apartment after a missile strike damaged a residential building in Dobropillia, in the Donetsk region of eastern Ukraine. Reuters -
Residents board-up windows of a damaged apartment building with plywood after Russian shelling in Dobropillya, Donetsk region. AP -
A police officer distributes humanitarian aid to people in Lyman, Donetsk. AP -
Ukrainian soldiers near Kramatorsk, eastern Ukraine. AFP -
A Ukrainian soldier receives medical treatment as he and others rest after fighting on the front line for two months near Kramatorsk. AFP -
Exhausted Ukrainian soldiers arrive at an abandoned building to rest and for medical treatment after fighting on the front line near Kramatorsk. AFP -
Ukrainians attend a solemn religious service to commemorate the fallen in the Russian occupation in Zdvyzhivka, on the outskirts of Kyiv. AP -
Hanna Selivon, 77, surveys what remains of her house, which she says was destroyed by Russian shelling on the outskirts of Chernihiv, Ukraine. Reuters -
Women cry as they take part in a rally demanding international leaders organise a humanitarian corridor for the evacuation of Mariupol, the besieged Ukrainian city where thousands are trapped. Reuters -
Angelina Jolie, Hollywood movie star and UNHCR goodwill ambassador, poses for photo with kids in Lviv, Ukraine. AP -
Firefighters try to put out a blaze after an explosion in Kyiv as Russia mounts attacks across Ukraine. AP -
A car parked under a tree in the partially abandoned town of Chernobyl. AP -
Ukrainian President Volodymyr Zelenskyy, right, and UN Secretary General Antonio Guterres leave a news conference in Kyiv. AP -
Military aid bound for Ukraine at Dover Air Force Base in Delaware. President Joe Biden has asked Congress to agree to $33 billion to bolster Ukraine's fight against Russia. AP -
Members of the pro-Russia Donetsk People's Republic militia stand guard as civilians go to receive aid in Mariupol. AP -
A destroyed building in the south-eastern city of Mariupol. AP -
A Ukrainian girl with other civilians on a bus as they flee the violence in Slovyansk, in the Donetsk region. Reuters -
A block of flats reduced to rubble in Mariupol. Reuters -
Explosions in a village near the eastern city of Izium. Reuters -
A car and piled sleepers in flames after shelling near Lyman station in Lyman, eastern Ukraine. AFP -
Residents and members of the Ukrainian emergency services clear debris after a recent Russian rocket attack in Zaporizhzhia, Ukraine. EPA -
The Russian Foreign Ministry in Moscow, where spokeswoman Maria Zakharova recently said that Ukraine had either carried out the executions of civilians in Bucha itself or positioned the bodies so as to incriminate Russian forces. AFP -
An aerial view of in a neighbourhood in Zaporizhzhia on the 65th day of the Russian invasion of Ukraine. AFP -
Clean-up crews at the site of an explosion in Kyiv, Ukraine. Russia struck the Ukrainian capital of Kyiv shortly after a meeting between President Volodymyr Zelenskyy and UN Secretary General Antonio Guterres. AP -
UN Secretary General Antonio Guterres and Ukraine's President Volodymyr Zelenskyy at a joint news conference in Kyiv as Russia's attack on Ukraine continues. Reuters -
Russia struck Kyiv shortly after the meeting between President Volodymyr Zelenskyy and UN Secretary General Antonio Guterres. AP Photo -
Volodymyr Tykhonov, 76, opens the door of his garage, which is riddled with bullet holes, in Zahaltsi, Ukraine. Getty Images -
President Zelenskyy welcomes UN Secretary General Antonio Guterres before their meeting. Reuters -
Iulia Shevchuk rests in a reception centre for displaced people in Dnipro, Ukraine. AP Photo -
American 155 mm howitzers due to be being loaded on to a US Air Force plane to Ukraine. AFP -
Smoke rises after an explosion at sunset in Kyiv. Getty Images -
Ukrainian rescuers pull out a part of a rocket that remained after shelling in the eastern city of Kharkiv. EPA -
Lyubov, 85, stands in front of a 19th century wooden church, damaged by rocket attack, in the Zhytomyr region of Ukraine. Reuters -
Ukrainian servicemen on patrol in Luhanske village. EPA
However, Europe’s sudden scramble for alternative energy supplies will “offset China's slowdown fears and send prices higher”, said Mr Halley.
China, the world’s second-largest economy and biggest crude importer, is experiencing a wave of Covid-19 infections and has introduced strict movement curbs in major cities such as Shanghai and the capital, Beijing, as part of its “zero-Covid” strategy.
There are currently no signs that the country is willing to ease movement restrictions that are slowing its economic growth momentum and piling pressure on already strained global supply chains.
Last month, the IEA cut its demand forecast for 2022 due to Covid-19 lockdowns in China and weaker-than-expected demand growth in advanced economies, especially the US.
Demand for the year has been lowered by 260,000 barrels per day from last month's projection to 99.4 million bpd for 2022, the Paris-based agency said.
Opec, representing some of the world’s top oil producers, also lowered its supply and demand forecasts, in its monthly market report, over concerns that the Russia-Ukraine war and lockdowns in China could stymie consumption.
