What's next for oil prices & global supply?

The global oil markets have been sent into a tailspin following Russia's ceasefire, causing a dip in prices and leaving experts pondering whether this downturn will persist. Martin Chomba, the Chairman of Petroleum Outlets Association of Kenya, weighed in on the situation during a recent interview with CNBC Africa. Chomba highlighted how the recent price movements are primarily driven by speculations and geopolitical factors, especially the ceasefire between Russia and Ukraine. He emphasized that the oil market is highly sensitive to global events, making it difficult to predict future trends with complete certainty. However, he noted that the perceived peace resulting from the ceasefire has played a significant role in the current market fluctuations. Discussing the potential impact on East Africa, Chomba pointed out that if Russian oil re-enters the global market - accounting for approximately 11% of the world's petroleum output - it could lead to price reductions in the region. However, he cautioned that East Africa's complex market dynamics, including prolonged product consumption timelines of up to three months, could delay the full benefits of any price changes. Factors such as internal government workings, geopolitical issues, and supply chain bottlenecks could hinder the immediate transmission of cost savings to consumers in the region. When questioned about the possibility of OPEC responding to an increase in Russian crude supply by implementing production caps, Chomba expressed his expectation of such a move. He highlighted that OPEC member countries, whose economies heavily rely on petroleum, are likely to collaborate to address oversupply issues and stabilize prices. Anticipating that OPEC will take action to reduce production levels to absorb excess oil from the market, Chomba suggested that the low-price environment may not persist for an extended period due to the organization's efforts to restore price equilibrium. In light of the geopolitical uncertainties surrounding the Russia-Ukraine conflict and ongoing Middle East tensions, Chomba advised that East African markets should prepare for price volatility and fluctuations in the coming months. While acknowledging the challenges posed by unpredictable global events and OPEC interventions, he reassured that East Africa's consumption patterns, which involve purchasing products months in advance, could serve as a buffer against sudden price shocks. Chomba concluded that while price oscillations are expected, the region's market should be able to adapt and navigate through the uncertainties ahead.