Oil Up as Ukraine Conflict Continues, Market Remains Tight

© Reuters.

By Gina Lee

AiVIF.com – Oil was up on Monday morning in Asia, jumping $2 as Ukraine dug in against heavy attacks from Russia. Major oil producers are also struggling to produce their allotted quotas under a supply agreement.

Brent oil futures rose 3.08% to $111.25 by 12:34 AM ET (4:34 AM GMT) after a 1.2% rise the previous Friday. WTI futures jumped 3.28% to $106.47, extending the previous session’s 1.7% jump.

Ukrainian deputy prime minister Iryna Vershchuk said earlier in the day that there was no chance that the country's forces would surrender in the city of Mariupol. As the conflict triggered by Russia’s invasion on Feb. 24 shows no sign of easing, some investors are questioning whether the market can replace the Russian crude supply hit by Western sanctions.

"The market continues to fret about supply disruptions, with data suggesting they are already impacting," ANZ analysts said in a note.

The Organization of the Petroleum Exporting Countries and allies (OPEC+)’s latest report showed some members are still falling short of their agreed supply quotas. OPEC+ missed its production target by more than 1 million barrels per day (bpd) in February 2022 under its pact to boost output by 400,000 bpd each month as it reverses sharp cuts made in 202, three sources told Reuters.

The two members who have the capacity to instantly raise output, Saudi Arabia and the United Arab Emirates, have so far resisted calls to accelerate production.

This poor supply outlook, alongside soaring prices, led the International Energy Agency on Friday to outline ways to cut oil use by 2.7 million bpd within four months. The methods include car-pooling, lowering speed limits, and lowering the cost of public transport. These measures could help offset the 3 million bpd of Russian crude and products that the organization estimated would be off the market by April 2022.