Oil Prices Marginally Drop by 1.8% Amidst High Volatility

Oil prices have reduced slightly amidst high volatility and the possibility of a further release of more oil from the International Energy Agency (IEA) emergency inventory.

The International Energy Agency members reported that they seek to reduce their use of Russian oil and gas radically. The organization is ready to release more oil from emergency stockpiles if needed.

Brent prices surpassed the 14,095.80 Kenyan Shilling mark during early trade on Thursday before declining at 2.3 percent later.

In the Intercontinental Exchange market, the May contract of Brent was trading at 13,683.24 shillings, lower by 1.81 percent from its previous close. The May contract of West Texas Intermediate declined 1.83 percent to 12,930.32 shillings per barrel.

The price swings in the oil prices can be attributed to the liquidity crunch that has caused the vulnerability.

Moreover, the fact that Clearing houses have been increasing margins has effectively made it more expensive to trade the same amount of oil. For instance, Brent Futures’ requirements were raised by 19 percent on Thursday. This is after the same commodity was increased by 32 percent earlier this month. Gasoil margins increased by 3.5 percent.

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Meanwhile, oil prices have climbed more than 60 percent so far this year caused by Biden’s executive order that banned the importation of Russian crude oil and certain petroleum products, liquefied natural gas, and coal.

The rising oil prices are a cause for concern globally, especially for countries that largely depend on Russia, the third-largest producer of petroleum after the U.S. and Saudi Arabia.

According to the U.S. Energy Information Administration, Russia exported almost 5 million barrels a day of crude oil in 2020. Nearly half of those exports went to European countries, while 42 percent went to Asia and Oceania.

Much of the burden of increase in oil prices have already been shifted to the consumers across the globe who are experiencing a sharp increase in retail fuel prices.

In Kenya, for instance, fuel prices have remained on a record high at the pump as the country struggles to beat the continuing increase in prices of commodities.

Kenyans are now paying five shillings more for a Super Petrol and Diesel liter. This is due to a rise in the landed cost of imported Super Petrol by 13.34 percent from 596.79 dollars to 676.40 dollars per cubic meter, while Diesel rose by 11.7 percent from 606.16 dollars to 677.31 dollars per cubic meter.

Other commodities include gold futures which have edged lower to 78,207.08 shillings at Multi Commodity Exchange (MCX), and silver, whose prices showed a softer tone at 104,222.43 shillings.