BAKU, Azerbaijan, May 20. Brent faces particular downside risks, should the EU fail to agree to a blanket import ban on Russian crude, Trend reports with reference to Fitch Solutions.
The company said in its latest report that key importers, such as Germany, will seek to end oil trade with Russia regardless, but failure to implement a ban would nevertheless weaken Brent.
Brent crude has fluctuated between USD107-112 over the course of the week, settling broadly flat at around USD108/bbl at the time of writing.
The market continues to be torn between tight supply on the one hand, led by underperformance by the OPEC+ group and export declines in Russia, and weakening demand on the other, with lockdowns in China undercutting imports. Meanwhile, the US benchmark WTI has gained a premium to Brent, after trading at a discount for most of the last decade.
While WTI is of a generally higher quality than Brent, the shale revolution and infrastructural bottlenecks has lowered its price. However, rising US exports, strong domestic demand and lower exposure to global price drivers has driven strong gains in the YTD. We currently forecast Brent to average a USD3/bbl premium to WTI over 2022, with the front-month contracts averaging USD100/bbl and USD97/bbl, respectively, although may look to lower the spread, given current market dynamics.
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