Oil Prices Decline Amid Ongoing Supply Concerns

By Gina Lee

Oil prices fell on Monday morning in Asia as investors took profits following a significant rise in the previous session. Meanwhile, concerns about global supply continue to mount due to the European Union’s forthcoming ban on Russian crude imports.

As of 12:42 AM ET, Brent crude was down 2.18% at $109.12, and WTI crude fell 2.04% to $106.41. Both benchmarks had experienced a roughly 4% increase the previous Friday and had briefly climbed more than $1 a barrel earlier in the session, with WTI reaching its highest level since March 28 at $111.71.

Kazuhiko Saito, chief analyst at Fujitomi Securities Co Ltd., noted that “oil markets are expected to gain this week as a pending ban by the European Union on Russian oil will further tighten global supplies of crude and fuels.”

The EU is working towards implementing a phased embargo on Russian oil within the month, in response to the ongoing invasion of Ukraine that began on February 24. According to multiple diplomats and officials, the embargo will proceed as planned, without any delays or diluted proposals, despite supply concerns in Eastern Europe.

In retaliation, Russia has imposed sanctions on several European energy companies. Additionally, U.S. gasoline futures reached another record high on Monday, driven by declining stockpiles that raised further supply concerns.

Saito indicated that “oil prices remained bullish, particularly for WTI’s near-term contract, as U.S. gasoline prices continued to rise amid weaker imports of petroleum products from Europe.”

On the supply front, U.S. energy companies added oil and gas rigs for the eighth consecutive week leading up to May 13, spurred by high prices and encouragement from the federal government for drillers to resume operations.

However, the Organization of the Petroleum Exporting Countries (OPEC) and its allies (OPEC+) have struggled to meet previously set targets for production increases due to underinvestment in oilfields by some members and recent declines in Russian output.

According to OPEC’s latest monthly report, the organization’s output rose by 153,000 barrels per day (bpd) to 28.65 million bpd, falling short of the 254,000 bpd increase permitted under the OPEC+ agreement.