Oil jumps towards $108 as supply worries persist despite reserves liberation

Workers walk as oil pumps appear in the background at the Ouzin oil and gas field in Kazakhstan’s Mangistau region, November 13, 2021. REUTERS/Pavel Mikheev

LONDON (Reuters) – Oil jumped more than 3 percent on Monday to $108 a barrel as the release of strategic reserves by consuming nations failed to address supply concerns arising from Russia’s invasion of Ukraine and the failure of an Iran nuclear deal.

The invasion in February heightened supply concerns that were already supporting prices. Sanctions against Russia and shunning buyers of Russian oil have already reduced production and raised fears of even bigger losses. Read more

“Will liberating barrels from the strategic reserves fill the shortage caused by sanctions and buyer alienation from Russian oil? In short, no,” said Stephen Brennock of BVM oil brokerage.

Brent crude rose $3.19, or 3.1 percent, to $107.58 a barrel by 1334 GMT. US West Texas Intermediate crude rose $3.46, or 3.5%, to $102.73. Both contracts were down more than $1 earlier in the session.

Crude oil fell about 13% last week after US President Joe Biden announced a record release of US oil reserves, as members of the International Energy Agency pledged more wiretapping of the reserves. The price of crude oil reached $139 last month, the highest level since 2008. READ MORE

“The massive launch of 1 million barrels per day over six months in the US alone is likely to ensure that the oil market is no longer severely undersupplied in the second and third quarters,” Commerzbank’s Karsten Fritsch wrote in a report.

Oil also got a boost from stalled talks in Vienna to revive the Iran nuclear deal, which would allow sanctions on Iranian oil to be lifted. On Monday, Iran blamed the United States for the ceasefire. Read more

The downward pressure came from the armistice in Yemen, which may mitigate supply threats in the Middle East.

The United Nations brokered a two-month truce between a Saudi-led coalition and the Iran-aligned Houthi movement for the first time in the seven-year conflict. Saudi oil facilities were attacked by the Houthis during the fighting. Read more

Reporting by Alex Lawler; Additional reporting by Florence Tan and Isabel Kwa in Singapore. Editing by David Goodman, Bernadette Bohm and Mark Porter

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