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April 5th - In recent weeks, aviation fuel prices have surged from $85-90 per barrel to $150-200 per barrel, posing a significant challenge to the global aviation industry, with many airlines adjusting their operating strategies. On April 4th, local time, Manix Fortmar, Chairman of the Representative Committee of KLM Royal Dutch Airlines, warned that if shipping through the Strait of Hormuz remains disrupted, airlines could face pressure to cancel flights within six weeks. Benjamin Smith, CEO of Air France-KLM Group, stated that the company is preparing for potential fuel shortages. Michael OLeary, CEO of Ryanair, Europes largest low-cost carrier, said on April 1st that the airline may face a fuel supply shortfall of up to 25% in May and June, with overall European aviation fuel supplies expected to tighten in May. OLeary also said that there is a possibility of a significant increase in airfares from April to June.On April 5th, Irans Islamic Revolutionary Guard Corps issued a statement saying it had launched strikes against petrochemical plants in the UAE, Kuwait, and Bahrain, an oil refinery in Israel, and a natural gas facility in the UAE. Further attacks on civilian targets within Iran would further intensify the damage to US economic interests in the region.On April 5th, Japanese Prime Minister Sanae Takaichi stated that Japan has secured enough naphtha supplies to cover at least four months of demand, and the government is seeking to alleviate concerns about potential supply shortages. Takaichi said on social media on Sunday that these supplies include approximately two months worth of overseas procurement shipments and domestic refinery production, as well as approximately two months worth of inventory of intermediate chemical products derived from naphtha, such as polyethylene. According to the Japan Petrochemical Industry Association, Japan relies on imports for about 60% of its naphtha, with over 70% coming from the Middle East. Major Japanese naphtha producers have already reduced production of this petroleum byproduct. Naphtha is widely used in the manufacture of plastic bottles, building materials, and electrical appliances.Ukraines state-owned oil and gas company, Naftogaz, said that Russia attacked its facilities in the Poltava region for the second consecutive day.April 5 - According to data from LSEG and Kpler, a tanker carrying Iraqi crude oil was spotted transiting the Strait of Hormuz along a route close to the Iranian coast, one day after Iran indicated that Iraq could be exempted from restrictions on passage through this key shipping lane. Kpler data shows that the "Ocean Thunder" loaded approximately 1 million barrels of Basra Heavy crude oil on March 2 and is expected to unload in Pengerang, Malaysia, in mid-April.

Oil Slides 4 Percent , Below $100 on China Lockdowns, Reserves Release Plan

Aria Thomas

Apr 12, 2022 09:16

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Brent futures sank $4.30, or 4.2 percent, to $98.48 a barrel, while WTI oil dropped $3.97, or 4.0 percent, to $94.29. Brent closed at its lowest level since March 16.


China, the world's largest oil importer, has seen a halt in fuel use as a result of COVID-19 lockdowns in Shanghai, experts at the Eurasia Group consultancy said. Shanghai, China's financial hub, began reducing lockdowns in certain areas on Monday, despite a record of over 25,000 new COVID-19 illnesses.


"Even when Shanghai's limitations are relaxed, China's zero-Covid rules will almost certainly continue to be a drag on demand," Eurasia Group said, stressing that Shanghai's lockout likely lowered China's total oil consumption by up to 1.3 million barrels per day (bpd).


To assist compensate for a deficit in Russian crude after Moscow's sanctions, IEA members, including the US, would discharge 240 million barrels of oil over the next six months.


The release of Strategic Petroleum Reserve (SPR) volumes totals 1.3 million barrels per day (bpd) over the next six months, adequate to compensate for a 1 million barrels per day (bpd) deficit in Russian oil production, according to JP Morgan analysts.


"The (SPR) release will be the biggest in history, and it has already broken the back of the WTI price curve," said Robert Yawger, executive director of energy futures at Mizuho, adding that spreads were edging closer to contango.


Contrary to popular belief, contango indicates an oversupplied market. It occurs when pricing for future months are greater than those for the current month.


In comparison, when supply fears were strong in early March, the WTI curve was in what Yawger referred to as "super-backwardation," with each month ending at least $1 a barrel lower than the previous month until November 2023.


The US dollar was on course to increase for an eighth consecutive day versus a basket of other currencies, putting upward pressure on oil prices. Oil becomes more costly for holders of foreign currencies as the dollar strengthens.


The European Union's (EU) administration is formulating recommendations for a Russian oil embargo, despite the fact that no agreement to restrict Russian petroleum has been reached.


The Organization of the Petroleum Exporting Countries (OPEC) warned the EU that sanctions on Russia might result in one of the biggest oil supply shocks in history, with no way to compensate. OPEC hinted that it will not increase oil production.


President Joe Biden of the United States and Indian Prime Minister Narendra Modi met Monday as Washington pressed its Asian partner to back its reaction to Russia's incursion.


India, the world's third-largest oil importer, has boosted its imports of Russian crude in recent months as a result of Moscow's compelled sale of oil at a deep discount after the invasion of Ukraine.


In March, India's fuel demand reached a three-year high, with petrol sales reaching an all-time high.

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