Turkey earthquake disrupts oil supply and lifts Brent price

Front-month ICE Brent has jumped $2.44/bbl higher on the day, to $82.44/bbl at 09.00 GMT.

PHOTO: Fire erupted in containers at Turkey’s Iskenderun port after a major earthquake. @ragipsoylu via Twitter

Upward pressure:

All operations have been halted at the Turkish Port of Iskenderun after a deadly earthquake hit Turkey and Syria yesterday. Cargo operations at Limak Terminal and Ceyhan Marine Terminal have been paused due to reported damage to port infrastructure. according to GAC Hot Port News.

“Supply-side disruptions help push crude oil higher,” writes ANZ strategist Daniel Hynes. He has explained that the Ceyhan Marine Terminal exports up to 1 million b/d of crude oil.

Craig Erlam, a senior market analyst at OANDA, says there is a "growing expectation" that the Chinese economy will strongly recover this year, driving oil demand higher.  

Saudi Arabia has raised the price of its flagship Arab light-grade crude oil by $2/bbl above the regional benchmark, says OANDA’s Edward Moya. “The outlook can’t be that bad if the Saudis are raising prices,” he adds.

The G7 coalition - which includes the EU and Australia - has set imposed a price cap of $100/bbl on Russian refined products traded at a premium to crude, and a cap of $45/bbl on Russian refined products traded at a discount to crude.

Downward pressure:

The possibility of further interest rate hikes in the EU and US remains a downward pressure on Brent. Higher interest rates mean that borrowing costs become more expensive, which can lead to a decrease in consumer spending. This can put economies at risk of recession.

The 53-year low in US employment has raised concerns that the US Federal Reserve (Fed) might raise interest rates more aggressively instead of slowing them down as anticipated. Low unemployment can lead to a spike in wages, leading to higher inflation.

While the Chinese economy has started to rebound from the Covid-19 pandemic, uncertainty remains about the extent and speed of the recovery. This has resulted in an overall sense of caution among oil futures investors.

By Konica Bhatt

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