Oil Prices Settle Mixed Due to Supply And Demand Worries in Russia

Oil prices have been boosted by a tightening supply picture after sanctions on Russia – the world's second biggest oil exporter and a critical European supplier – for its invasion of Ukraine, which Moscow refers to as a "special operation."

"As the Ukraine war escalates, the chance of the conflict lasting longer grows, as does the possibility of Russian supplies being cut off from the market," said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.

The market was further bolstered by a government report suggesting that US oil stocks declined by 8 million barrels last week, owing to a spike in exports to a more than two-year high. [EIA/S]

Both benchmarks, however, fell roughly 5% on Tuesday after the International Monetary Fund lowered its global growth forecast by nearly a full percentage point, citing the economic impact of Russia's war in Ukraine and warning that inflation had become a "clear and present danger" for many countries.

"Weakening growth and rising inflationary pressures can only imply one thing: the global economy is on the verge of stagflation," P.M. economist Stephen Greenock said.

Continuing coronavirus lockdowns in China have also weighed on demand and pricing in the world's largest petroleum importer.

The European Commission is attempting to accelerate the availability of alternative energy sources in order to reduce the cost of the Russian oil embargo and convince Germany and other hesitant EU states to approve the policy, an EU source told Reuters.

Meanwhile, a series of disruptions exacerbated supply issues. Libya, an OPEC member, has been forced to suspend production of 550,000 barrels per day due to a wave of blockades on key oilfields and export terminals, the country's National Oil Corporation (NOC) stated.

The Organization of the Petroleum Exporting Countries and its allies, collectively referred to as OPEC+, produced 1.45 million barrels per day less than its target in March, as Russian output began to decline following the imposition of Western sanctions, according to a report from the producer alliance.