Risk Premium Continues to Fall Out of Market
April 23, 2024
With no real supply disruptions, the risk premium continues to exit the market, and prices are nearing levels that, if broken, could signal a larger selloff. There are still fundamental concerns for this market, but right now, they seem to be on the back burner.
The US has implemented some new sanctions on Iran’s oil, but they have sidestepped the current sanctions for a long time now, so the market will take a wait-and-see approach to these new efforts to limit Iran’s crude exports.
UBS expects Brent’s price to increase to $91 per barrel by mid-year. It stated, ”With oil demand rising seasonally, we continue to see the oil market as being undersupplied.”
Russia remained China’s top oil supplier in March.
Bloomberg News reported that Russia’s weekly oil refining fell to a near 11-month low due to flooding and a slowdown in repairs to plants that were hit by Ukrainian drone attacks. The report said, “Russia processed 5.22 million barrels of crude oil daily from April 11 to 17. It said that was about 10,000 bpd, or 0.2%, below the average of the prior seven days.
Yesterday was the last day for May WTI crude, and as June rolled to become the front month, the price was roughly a dollar lower than May. As I write this, June crude oil is trading at $81.45, and the $81 to 80 dollar zone is a crucial support zone.