Post by : Naveen Mittal

Photo: X / ReutersAfrica

Oil Prices Stay Steady Despite Oversupply and Conflict Risks

Oil prices around the world remained steady on Friday, as concerns about too much oil being produced were balanced by fears about disruptions caused by wars and conflicts in the Middle East and Ukraine. Even though experts expect that oil supply will increase this year, risks from fighting and sanctions are keeping prices from falling too much.

What Happened to Oil Prices?

On Friday morning, the price of Brent crude oil went up by 42 cents, or 0.6%, reaching $66.79 per barrel. Similarly, U.S. West Texas Intermediate (WTI) crude rose by 31 cents, or 0.5%, to $62.68 per barrel.

The previous day, both Brent and WTI prices had dropped. Brent fell by 1.7%, and WTI dropped by 2%. This shows that the oil market is going through changes almost every day, depending on new information and global events.

Why Are Prices Steady and Not Falling More?

Even though there is too much oil being produced and weaker demand from the U.S., prices are staying stable because of several risks:

1. Conflicts in the Middle East and Ukraine:
   Fighting in parts of the world like the Middle East and Ukraine threatens oil supplies. If oil-producing regions are affected, it could stop or reduce the amount of oil that reaches the market.

2. Supply Disruptions:
   Recent drone attacks and other events have caused damage to oil facilities, making it harder to keep up production.

3. Sanctions on Russia:
   Many countries have placed sanctions on Russia due to its involvement in conflicts. These sanctions restrict Russia’s ability to sell oil and other products, which limits the supply to global markets.

4. Strong Buying from China:
   China continues to buy oil to build its reserves, which supports demand and helps keep prices from dropping.

What Did the Experts Say?

Ole Hvalbye, a research analyst at SEB, explained that the oil market is trying to balance between too much supply and risks of disruptions. He said the market is struggling to keep prices stable because of uncertainties and rising costs in refining oil.

John Evans, an analyst from PVM Oil Associates, said that although there could be a price drop, strong demand in certain markets and sanctions on Russia are helping maintain support for prices.

What Did the Reports Say?

The International Energy Agency (IEA) released a report stating that oil supply would rise faster than expected this year. This is mainly because the OPEC+ group, which includes OPEC countries and allies like Russia, has planned to produce more oil.

On the other hand, OPEC's own report did not change its demand predictions. It said that the global economy is still growing steadily, and more oil will be needed both this year and the next.

Recent Events That Could Impact Oil Supplies

1. Attack on Russia’s Port:
   On Friday, a drone attack hit the port of Primorsk in northwestern Russia, one of the largest oil and fuel export locations in the country. The attack caused a fire on a vessel and a pumping station, potentially affecting oil exports.

2. Adani Group’s Decision in India:
   India’s largest private port operator, Adani Group, announced it will ban oil tankers that are sanctioned by Western countries from entering its ports. India is a major buyer of Russian oil shipped by sea, and this decision could limit the supply of Russian oil to global markets.

What Are Sanctions and Why Do They Matter?

Sanctions are penalties or restrictions placed on countries or companies, often to force them to change their actions. In this case, sanctions have been imposed on Russia by countries like the United States, the European Union, and the United Kingdom. These sanctions prevent Russian oil from being easily sold and shipped around the world.

Because India is one of the largest buyers of Russian oil, blocking certain tankers could reduce the overall supply, helping to keep oil prices from falling too much.

How Does This Affect Ordinary People?

When oil prices go up or stay high, it can affect everyday life. Higher oil prices can lead to:

• Higher fuel costs, making transportation more expensive.

• Increased prices for goods that depend on oil for production or shipping.

• Greater strain on household budgets as people have to spend more on fuel.

However, stable prices mean that sudden shocks or shortages are less likely, which helps keep life more predictable.

What’s Next for Oil Markets?

Experts believe that the oil market will continue to face uncertainty. If conflicts or sanctions increase, supply could be restricted even further, pushing prices up. On the other hand, if the global economy slows down or more oil is produced than needed, prices could drop.

The world will be watching how events in Ukraine, the Middle East, and other regions develop. Strong demand from countries like China and possible sanctions on Russia are likely to keep oil prices supported, at least for now.