Oil Prices Rebound on Supply Concerns Amidst Russian Sanctions
Oil prices surged on Monday due to ongoing supply apprehension following the imposition of two rounds of sanctions by Washington on Russia's energy sector over the ongoing Ukraine conflict.
Brent crude futures rose by 0.4%, reaching $81.13 per barrel after a 0.62% decline in the previous session. U.S. West Texas Intermediate (WTI) crude, expiring Tuesday, increased by 0.8% to $78.47 per barrel after closing 1.02% lower on Friday. The more actively traded April contract gained 36 cents to settle at $77.75 per barrel.
Analyst Tim Evans of Evans on Energy emphasizes that the sanctions will likely restrict supply in the near term. He explains that increased tanker rates for unencumbered vessels and a widening backwardation in crude oil calendar spreads indicate supply tightness.
Backwardation occurs when prompt prices exceed those in future months, reflecting constrained supply. The Brent prompt monthly spread widened by 2 cents to $1.24 per barrel on Monday, while the WTI spread expanded by 17 cents to 66 cents per barrel.
Despite the supply concerns, easing tensions in the Middle East limited oil price gains. Hamas and Israel successfully exchanged hostages and prisoners on Sunday, signaling a ceasefire after a 15-month conflict.