Around $30 a barrel of war premium is baked into the current oil prices, according to Kuwait Petroleum Corporation (KPC), the state oil firm of one of OPEC’s top producers.
“I see a war premium of about US$30 in the price right now,” Sheikh Nawaf Al-Sabah, chief executive officer at KPC, told Bloomberg TV on Tuesday.
Oil prices surged above $100 per barrel after Russia invaded Ukraine at the end of February and have largely stayed above the triple-digit mark for most of the time since then.
Early on Tuesday, prices were up by around 1.5 percent, with Brent Crude at $115 a barrel, and the U.S. benchmark, WTI Crude, at $111.
Despite concerns about Chinese demand with the “zero COVID” policy and fears that the biggest interest rate hikes in decades would accelerate a path to a recession, oil prices have held above $100 as traders expect more Russian supply to come off the market while global oil flows are changing for good.
Kuwait, OPEC’s fourth-largest producer behind Saudi Arabia, Iraq, and the United Arab Emirates (UAE), has seen an uptick in demand from Europe for Kuwaiti refined petroleum products, the KPC executive told Bloomberg on the sidelines of the Qatar Economic Forum.
Europe is looking to replace seaborne imports of Russian crude oil and refined products ahead of an EU embargo expected to take effect at the end of this year. Moreover, the supply of diesel is especially tight in Europe now, also because buyers are shunning Russian oil.
“We’re getting more calls for products,” the CEO of the Kuwaiti state oil firm told Bloomberg.
Kuwait has a major refinery, Al Zour, coming online later this year. The refinery, with a capacity of 615,000 barrels per day (bpd), is expected to produce mostly diesel and very low sulfur fuel oil.