Critics fear any cap will only worsen geopolitical tensions: File Image/Pixabay
The roller coaster of volatility that is the crude trading market saw the commodity on Monday achieve price gains due to the persistent fear of supply tightness, spurred by a worsening political crisis in Libya that could suspend exports.
The National Oil Corp. said it could declare force majeure and cause shipments to be halted, within 72 hours, according to a statement on Monday.
Anti-government unrest in Equador posing an even quicker potential for oil production problems was also a major concern for traders: that country's energy ministry stated in an email that production is likely to halt completely within 48 hours if road blocks and vandalizing of oil wells continue.
Dennis Kissler, BOK Financial
Very near term demand remains stubbornly strong
Brent on Monday settled up $1.97, or 1.7 percent higher, at $115.09 per barrel, while West Texas Intermediate closed up $1.95, or 1.8 percent, at $109.57 per barrel.
Dennis Kissler, senior vice president of trading at BOK Financial, remarked, "It seems most traders know more supply is coming but very near term demand remains stubbornly strong."
He added that with the advent of the Organization of the Petroleum Exporting Countries (OPEC) meeting this week to discuss production increases, it's "keeping the market in a nervous trade."
Also keeping traders on edge is Iran's chief negotiator and his U.S. counterpart heading to Qatar in the latest attempt to revive the nuclear deal between the two countries, which if ratified could add millions of barrels of oil to the global market.
Monday also saw the Group of Seven nations set to announce an effort to pursue a price cap on Russian oil, according to U.S. officials.
Negotiators want to install a system that limits the flow of money to Russia while allowing oil's availability to large buyers like China and India, in order to avoid further price shocks; the U.S. has suggested applying restrictions on insurance and other services needed to transport Russian oil.
But critics expressed their doubts about the cap doing anything other than exacerbating an already dire situation.
Vivek Dhar, analyst at Commonwealth Bank of Australia, noted that there was "nothing stopping Russia from banning oil and refined product exports to G7 economies in response to a price cap, exacerbating shortage conditions in global oil and refined product markets."