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Crude oil futures rose to multi-year highs for the second straight session on Tuesday, as concerns about tightening supplies push prices higher.
Ukraine’s recent attacks on Russian refineries could impact global oil supplies, potentially resulting in a decrease of approximately 350,000 bbl/day of oil. global oil supplies and a rise in U.S. crude prices by $3 a barrel, StoneX energy analyst Alex Hodes told Reuters.
Analysts at JP Morgan said 900,000 barrels of Russian refinery capacity are offline, adding a $4 per barrel risk premium to oil prices.
OPEC’s supply cuts have helped support prices, and Iraq said this week it would offset the production cuts.
Also supporting crude oil prices are signs of stronger demand and economic growth in China, where industrial production and investment grew more than expected at the start of the year and the country refined a record amount of raw.
U.S. data on Wednesday is expected to reveal a second straight weekly decline in domestic crude inventories, as well as another drop in gasoline, according to a survey of analysts by The Wall Street Journal.
“We are in a global supply crisis across all oil,” says Phil Flynn, senior analyst at Price Futures Group.
Nymex Front-Month Crude (CL1:COM) for April delivery is closed +0.9% at $83.47/bbl, and May Brent crude (CO1:COM) is finished +0.5% at 87.38 dollars a barrel, the best closing values since October 27 and 31 respectively.
Nymex RBOB gasoline futures notched their seventh straight daily gain as the April contract closed +0.2% at $2.7622/gal.
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The energy sector (NYSEARCA:XLE) erased early losses, then rode the rally in crude oil futures and was the best performing S&P sector of the day, +1.1%; Marathon Petroleum (MPC), Oneok (OKE), Diamondback Energy (FANG), and Valero Energy (VLO) all hit record intraday highs.
The oil and gas sector is now +7.8% since the end of February, compared with a 1.4% gain so far this month in the S&P 500 Index.
Citigroup analysts are surprisingly bearish on crude prices, predicting Brent will slip slightly to average $78/bbl in the second quarter, before slipping to $74/bbl in the third quarter and $70/bbl in the fourth quarter and possibly continue to fall to $55/bbl by the end of next year. .
Citi’s bearish bias is linked to concerns over OPEC+ spare capacity and new production from non-OPEC countries; the bank says OPEC+ spare capacity has increased by about 2 million barrels per day compared to pre-COVID levels.