Oil gains 3% as conflict in Ukraine dashed Iran’s supply hopes

Oil pours from a spout from Edwin Drake's original 1859 well that started the modern petroleum industry at the Drake Well Museum and Park in Titusville, Pennsylvania
Oil pours from a spout from Edwin Drake’s original 1859 well that started the modern petroleum industry at the Drake Well Museum and Park in Titusville, Pennsylvania, United States October 5, 2017. REUTERS/Brendan McDermid/Files

March 4, 2022

By Scott DiSavino

NEW YORK (Reuters) – Oil rose about 3% in a volatile session on Friday as disruption to Russian exports from Western sanctions outweighed hopes of more Iranian supplies should Washington strike a nuclear deal with Tehran.

Prices have soared over the past week after the United States and its allies sanctioned Russia after its invasion of Ukraine. Russian oil sales were halted as sellers failed to place orders despite offering massive discounts on benchmark Brent crude.

Brent was on track for its highest close since June 2014 and WTI for its highest close since May 2011. Over the week, Brent rose to its highest intraday price since May 2012 and WTI to its highest since September 2008.

Prices rose after Russian troops seized Europe’s largest nuclear power plant. A fire at a training building was extinguished and officials said the facility is now safe.

Brent futures were up $3.36, or 3.0%, to $113.82 a barrel by 12:04 p.m. EST (1704 GMT), while US West Texas Intermediate (WTI) crude was up $3.43, or 3.2 % rose to $111.10.

“Iran claims it will be able to ramp up production quickly, but the potential disruptions to Russian supplies are too big a shock for energy markets,” said Edward Moya, senior market analyst at OANDA.

Russia exports about 4 to 5 million barrels of crude oil every day, more than any other nation except Saudi Arabia. Buyers have paid dearly for other qualities while eschewing Russian casks. On Friday, Shell bought a shipment of Russian oil at a discount of more than $28 to current physical Brent, a signal of how troubled the Russian market is at the moment.

Crude oil prices are set to post their strongest weekly gains since mid-2020, with the US benchmark up more than 21% and Brent up 16%.

Indirect talks between Iran and the United States on reviving the 2015 Iran nuclear deal are close to agreement, Britain’s chief envoy said on Friday as she and her French and German counterparts flew home to brief ministers.

On Thursday, prices traded in a $10 range but slipped lower for the first time in four sessions as investors focused on relaunching the Iran deal that would increase Iranian oil exports by as much as 1 million barrels a day (bpd ) could boost and give way to deliveries.

Still, Iranian Foreign Minister Hossein Amirabdollahian said on Friday that the West’s “rush” to reach a nuclear deal “cannot prevent Iran’s red lines from being met,” including economic guarantees.

Libya’s National Oil Co (NOC) also supported oil prices this week, temporarily halting exports from four ports due to bad weather, it said on Thursday.

Libya, an OPEC member, produced about 1.2 million bpd of crude oil in 2021, according to US energy data.

More oil stocks are to be added from a coordinated release of 60 million barrels of oil reserves by developed countries agreed this week. Japan said on Friday it plans to release 7.5 million barrels of oil.

(Additional reporting by Alex Lawler in London, Florence Tan in Singapore and Sonali Paul in Melbourne; Editing by Kirsten Donovan and David Gregorio) Oil gains 3% as conflict in Ukraine dashed Iran’s supply hopes

Caroline Bleakley

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