Oil price surge: Devastating blow for UK motorists as barrel prices hit £90

Russian oil ban not enough to stop them funding war says expert

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It means there will be no respite for drivers struggling with record fuel prices along with the ongoing cost of living crisis. It comes as US refineries have increased production to levels not seen since before the start of the coronavirus pandemic.

The increase in production is a response to a dip in supplies.

Last week US crude stockpiles fell by one million barrels.

Flagship Brent Crude prices increased 0.28 per cent to $113.90 (£90) per barrel, while WTI Crude prices climbed 0.41 per cent to $110.20 (£87) per barrel.

US refiners have boosting capacity use to 93.2 per cent, its highest since December 2019.

They have had to keep facilities running at full tilt in order to deal with post-pandemic demand.

Globally, crude supplies have continued to tighten as buyers avoid oil from Russia, the world’s second-largest exporter, after the country’s invasion of Ukraine.

There are also reports of difficulties obtaining insurance from Western underwriters for Russian crude supplies, with investors concerned about inadvertently breaching sanctions.

Even without a formal legal ban, self-sanctioning by numerous European companies has led to a record amount of Russia’s crude oil sitting in vessels at sea as it struggles to find buyers. 

However China’s Dynamic Zero Covid policy of attempting to trace and track every Covid case along with lockdowns could set a ceiling at rising prices.

Beijing has imposed restrictions while Shanghai plans to keep most restrictions in place this month.

These restrictions will lead to lower levels of economic activity and lead to lower demand which could be particularly significant in the case of Shanghai.

This fall in demand is likely to limit price rises. 

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Craig Erlam, senior market analyst at OANDA said that Chinese Covid restrictions would prevent a much larger “rally” in prices.

He said: “Oil prices are continuing to consolidate around the upper end of their trading range over the last couple of months.

“Concerns about Covid cases in Beijing and global growth are continuing to prevent a much larger rally in oil prices as a result of the undersupply in the market, a potential EU ban on Russian imports and the reopening in Shanghai.

“Risks still remain tilted to the upside, even after the recent moves, but it just may not be as explosive as we’ve seen at times before.”

Commerzbank analysts Barbara Lambrecht and Carsten Fritsch expect prices to fall in the second half of the year, expecting demand to be met by sufficient supplies.

They said: “Oil prices have calmed down after the sharp rise at the beginning of the war in Ukraine.

“This is because Russian oil supply is not falling as much due to robust purchases by India and demand is rising less dynamically than expected as a result of the corona lockdowns in China.

“Moreover, the release of strategic oil reserves is bringing additional oil to the market. The oil market should therefore be sufficiently supplied in the second half of the year.

“We expect the price of Brent oil to fall to USD 95 per barrel by the end of the year.”

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