Crude oil prices added over $2 per barrel on Monday on the news about a production halt at Norway’s Johan Sverdrup field due to an onshore power outage but earlier today the momentum began to slow down with traders refocusing on fundamentals. Despite that dip, the market will be carefully watching developments between Russia and Ukraine. Brent crude was trading at $73.36 a barrel at the time of writing, with West Texas Intermediate at $69.20, both up from opening but modestly.“But investors stayed wary, assessing the direction of the Russia-Ukraine war after the weekend’s escalation,” he added.
Toshitaka Tazawa of Fujitomi Securities analyst told Reuters. “Some position adjustments kicked in after Monday’s rally,”
Johan Sverdrup is the biggest producing oil field in Western Europe. It began producing in 2019 and its peak output is seen either this year or next. The peak production level is seen at 755,000 barrels daily, which is significantly higher than initial peak output expectations of 660,000 bpd. The peak output was hit for the first time this September when Johan Sverdrup produced 756,000 bpd. The field’s output alone accounts for a third of Norway’s total oil production.
Robert Yawger, director of the energy futures division at Mizuho Securities USA said it is rare for spot prices to be up almost 3% at the same time that the curve is under pressure and threatening to switch to contango,” “However, it is more likely to happen when speculators scramble to spread out of their position ahead of expiration, selling at the front of the curve and buying further out.”
Rebecca Babin, senior energy trader at CIBC Private Wealth Group. was quoted: Speculation that an emboldened Ukraine may put Russian energy assets at risk and increase the likelihood of direct involvement from the US and North Korea is reducing the urgency to sell as well, said NB: This is a over reaction to Ukraine’s use of what is in essence a field short range missile system that at best makes a small boom with a 200 mile range.
Oil prices got a geopolitical boost at the start of the week that seems to have remained for the time being. The boost came from the Biden administration’s decision to allow the Ukrainian army to target Russian territory with long-range missiles. The decision was a stark departure from the administration’s previous stance. Russia called the decision reckless and warned it would constitute a direct confrontation with NATO. NN: See yesterdays pod cast Titled: Biden Bombing Trump Peace Plan….. Point in fact we regard yesterdays rally as a selling opportunity,,,,, And sell we did.