International Energy Agency’s supply warning sends oil futures soaring

Oil futures climbed in early trade on Thursday, recouping some of the previous day’s losses, as the International Energy Agency (IEA) stated a drop in oil demand owing to higher prices would not compensate for a Russian oil supply shutdown.

Brent oil futures were up around 66 cents, or 0.67%, to $98.68 a barrel, while WTI crude in the United States was up 84 cents, or 0.86%, to $95.86 a barrel.

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Both prices closed lower on Wednesday, owing to an unexpected increase in US oil stocks and hints of progress in Russia-Ukraine peace negotiations. US crude was down 1.08% at $95.04 per barrel, while Brent was down 1.9% at $98.02 per barrel.

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However, futures began the morning higher after the market analyzed an International Energy Agency report that stated 3 million barrels per day of Russian oil supply might be shut down owing to Western sanctions and buyer scepticism about Russian exports. This would be greater than the 1 million BPD decline in demand expected as a result of increased pricing.

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“Questions about how much Russian oil will continue to swing and uncertainty in how bad crude demand destruction will get will keep energy markets jittery,” Edward Moya, a senior market analyst for OANDA, wrote in a note.

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According to the U.S. Energy Information Administration, oil stockpiles in the United States increased by 4.3 million barrels in the week ending March 11, to 415.9 million barrels, above experts’ estimates of a 1.4 million barrel fall.

The oil market mostly brushed aside the Federal Reserve’s decision to hike interest rates by a quarter of a percentage point on Wednesday.