On 9 April, the price of oil edged up closer to $103 a barrel amid unrest in eastern Ukraine, overshadowing a report showing a large rise in US crude stockpiles.
Some pro-Russian demonstrators in eastern Ukraine and in Moldova are reportedly calling for a referendum similar to the one that led to Russia’s illegal annexation of Crimea in March. “The whole issue over Ukraine and Moldova is going to be causing enough concern to put that price spike up,” Justin Urquhart Stewart, director and co-founder of Seven Investment Management in London, toldNew Europe on 9 April.
By early afternoon in Europe, benchmark US crude oil for May delivery was up 25 cents to $102.81 in electronic trading on the New York Mercantile Exchange. The contract gained $2.12 to $102.56 on 8 April. Brent crude, used to set prices for international oil varieties, was up 31 cents to $107.98 on the ICE Futures exchange in London.
Traders are uneasy about the potential for disruption of supplies due to instability in eastern Ukraine and more sanctions on Russia, a crucial supplier of oil and natural gas to Europe.
Armed pro-Moscow protesters occupied Ukrainian government buildings in two cities in the largely Russian-speaking east.
Kiev says the occupations that began on 6 April are part of a Russian-led plan, and Washington said Moscow could be trying to prepare for military action as it had in Crimea.
Meanwhile, Urquhart Stewart said that heading into the summer in theory oil prices should ease off because there should be less demand. “The time I really fear is actually in six months time when we are heading for the autumn and if we haven’t got any resolution to what’s happening in Ukraine and Russia potentially still trying to peel off various parts of Ukraine with high levels of Russian population and that could cause more disturbance and, of course, then both gas as well as oil would see a significant spike,” the London-based analyst told New Europe.
“But for the meantime I wouldn’t be surprised if it eases off a bit if the political situation doesn’t get any worse. Why? Because America is effectively independent of any fuel imports so their demand isn’t so strong also with the summer demand that might ease off but it all depends on the political nervousness,” Urquhart Stewart said.
On 7 April, oil futures slipped below $101 on news an agreement had been reached to reopen closed Libyan export terminals, which would increase global crude-oil supplies. But the announced reopening could turn out to be a drawn-out process, meaning it is unlikely to boost supplies imminently, analysts said.
Traders are also nervous about reports of multibillion-dollar oil talks between Tehran and Russia which may pose another obstacle to reaching an agreement over Iran’s nuclear programme. Iran and six world powers are hoping to narrow differences at a new round of nuclear talks in Vienna, less than three months before an informal July deadline for a deal.
On 9 April, prices also rose despite a report of surging US crude stockpiles. The industry-funded American Petroleum Institute said on 8 April that crude stocks expanded by 7.1 million barrels last week.
In related developments, during the Gulf Petroleum Forum (GPF) in Kuwait on 7 April, GPF Chairman Jassem Bechara called for effective solutions to safeguard the oil industry from negative effects of current dramatic events taking place on the international and Arab arenas. However, Kuwaiti Oil Minister Ali al-Omair said that current oil prices are “fair” despite strong geopolitical factors impacting the region.