Oil edges above $100 a barrel, but heads for a weekly loss as volatility stemming from Russia-Ukraine conflict remains high

• Brent crude oil was up almost 4% on Friday, trading at about $111 a barrel after its most volatile week in almost two years.
• The US and UK banned imports of Russian energy products this week and others could follow, analysts said.
• Supply concerns appear to have been overcome for now, however, this may only be temporary, market watchers said.

Oil rallied almost 4% on Friday, as it neared the end of its most volatile week since April 2020, as investors have had to weigh up what sanctions on Russian energy exports might do to the global balance between supply and demand. 

Brent crude futures were up 3.8% at $113.50 a barrel by 06:10 a.m. ET, while West Texas Intermediate gained 3.5% to trade around $109.70 a barrel. Even though it topped $140 a barrel, reaching its highest since 2014 this week, crude oil is heading towards a weekly decline of 4%. Brent has seen price swings of 30% this week, the largest since April 2020, when US crude prices briefly tumbled below $0, highlighting how quickly prices are reacting to external events. 

“Both contracts could well move sharply below $100.00 a barrel from here on any news perceived as easing supply disruptions. Similarly, both contracts could easily be back at $115.00+ on any negative headlines, it’s just that sort of market,” Jeffrey Halley, senior market analyst at Oanda wrote.

With the global economy at risk of slowing from the surge in inflation, investors are also pondering the potential for demand destruction from high energy prices. US inflation ran at its fastest since early 1982 in February according to data on Thursday, further stoking concern around stagflation among Wall Street traders. 

The US and UK said this week they would ban Russian imports of oil, gas and coal, which initially caused consternation among energy traders of wider bans. The two countries account for a combined 900,000 barrels per day in Russian imports of crude and refined products — a sliver of daily global demand of 100 million barrels per day. 

But the rest of Europe relies heavily on Russia for both oil and natural gas and Russia has signaled it could cut supplies to the region. The US and its allies are set to revoke Russia’s “most favored nation” status over its invasion of Ukraine on Friday, according to sources familiar with the situation, as reported by CNN. 

Removing the status means the US and other countries can impose tariffs on all Russian goods. This would increase the pressure on the Russian economy, which is already heading towards a deep recession according to some analysts, including prominent bear Albert Edwards, who is an economist at French bank Societe Generale.