Oil prices could be difficult to predict this week, with investors set to weigh up potential supply disruptions from the Russia-Ukraine crisis against the prospect of more Iranian exports if the US revives the 2015 nuclear agreement.
Both major benchmarks reported contrasting results at close of play on Friday, with Brent Crude futures settling 0.6 per cent at $93.54 per barrel while WTI Crude was down 0.5 per cent to $91.07.
Over the course of the week, Brent Crude posted a 0.9 per cent rise for its ninth weekly gain, while WTI fell 1.7 per cent – snapping an eight-week rally.
Prices reached eight year highs on 14 February, with analysts speculating the $100 milestone could be reached for the first time since 2014.
However, the growing prospect of easing oil sanctions against Iran has weighed on the market since then.
The deal taking shape lays out mutual steps to bring both sides back into full compliance, but the first steps do not reportedly include waivers on oil sanctions, diplomats said.
Meanwhile, tensions in Ukraine are seemingly close to boiling point – with US President Joe Biden warning that Russia has decided to invade Ukraine, while Prime Minister Boris Johnson has revealed the “omens are grim.”
If Russia does invade Ukraine, and the West responds subsequently with sanctions, this could result in a further shortening of oil supplies – as would conflict in the region.
The Kremlin has denied it is planning any attacks, despite massing nearly 200,000 troops within proximity of Ukraine’s border.
The country’s finance minister has also warned Russia would be prepared to re-route energy supplies if the country is sanctioned.
Meanwhile, OPEC+ has consistently missed its raised output production targets of 400,000 barrels per day, which has exacerbated supply difficulties.
This has led to strong criticism from the International Energy Agency, which has called on the group to meet its commitments.
OPEC+ remains committed to reaching output targets and has said it would seek to bring Iran into the agreement if a deal is reached with the US.
Reflecting the tightness in global oil supplies, the six-month ‘backwardation’ in Brent Crude hit its widest level on record on Wednesday.
This occurs when contracts for near-term delivery are priced higher than those for later months.