(Bloomberg) -- Oil is poised for the biggest weekly decline since November after a pause in the sizzling rally that followed Russia’s invasion of Ukraine and wild swings in prices.
Futures in New York rose above $107 a barrel on Friday, but are still down more than 7% for the week after the market was rocked by news of the U.S. ban on Russian oil imports and what looked to be the first signs of disunity in OPEC+. In two of the four trading sessions this week, Brent crude has swung by the most on record -- with intraday swings eclipsing $20 a barrel.
The fallout from the invasion has rippled through commodity markets from wheat to key fuels such as gasoline and diesel, increasing inflationary pressure around the world. Rystad Energy predicted Brent could soar to an eye-watering $240 a barrel this summer if countries continue to sanction Russian oil imports.
Mounting sanctions on Russia for its war in Ukraine has prompted fears that an already tight market may be stretched further, though OPEC and Chevron Corp. (NYSE:CVX) stressed this week that there is no shortage of barrels. Banks such as Goldman Sachs Group Inc (NYSE:GS). say that only demand destruction can halt the price rally.
Open interest in the main oil contracts has plunged to a six-year low in recent days as traders retreat from risk. Volatility has rocketed, and exchanges have been boosting margins, effectively raising the cost of buying and selling.
Brent remains deep in a bullish backwardation structure, where near-dated contracts are more expensive than later-day ones, indicating concerns about tight supply. The global benchmark’s prompt spread was at $3.90 a barrel on Thursday, compared with $1.39 at the start of last month.
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