Oil prices rise slightly ahead of long weekend due to Russian supply issues
Oil prices edged higher on Thursday in tight trade ahead of a long weekend as traders weighed news of a possible European ban on Russian oil imports against a bigger-than-expected rise in U.S. oil inventories and a decline in refining activity in China.
Brent crude futures were up 42 cents, or 0.4%, at $109.17 a barrel, while US West Texas Intermediate futures were up 23 cents or 0.22% at 104, $39 a barrel at 1223 ET or 1622 GMT.
While the European Union did not impose a ban on Russian oil imports in response to Russia’s invasion of Ukraine, the New York Times reported that EU officials were preparing an embargo on Russian petroleum products.
It comes as Chinese refiners are set to cut crude throughput this month by around 6% – a scale last seen at the start of the COVID-19 pandemic two years ago – for easing bloated fuel inventories as recent COVID lockdowns reduce consumption, industry sources and analysts said.
Despite signals that the global supply disruption will persist, U.S. oil inventories rose by more than 9 million barrels last week, the U.S. Energy Information Administration said Wednesday, in part thanks to the release of the country’s strategic reserves.
Analysts in a Reuters poll had only forecast a build of 863,000 barrels.
Ricardo Evangelista, principal analyst at ActivTrades, said that while inventory buildup and a drop in market activity due to the long weekend in Europe, America and most of Asia put pressure on the oil, positive factors remained.
“The outlook for the price per barrel remains very bullish – demand remains amid tight supply,” he added.
U.S. gasoline inventories fell 3.6 million barrels last week, much more than expected, and distillate inventories also fell.
On Wednesday, both contracts shrugged off a rise in U.S. crude inventories to end the trading session up more than 4%.
U.S. oil production forecast revised up despite labor and supply chain constraints as higher prices spur more drilling and well completion activity, according to industry experts.
The International Energy Agency warned on Wednesday that from May around 3 million barrels a day of Russian oil could be tied up due to sanctions or buyers willfully avoiding Russian shipments.
Meanwhile, major global trading houses also plan to cut crude and fuel purchases from state-controlled Russian oil companies in May, Reuters reported on Wednesday.
Russia’s Energy Ministry said on Thursday it was restricting access to its statistics on oil and gas production and exports.
Trade was set to continue to be “somewhat jittery” as the war between Russia and Ukraine continues and countries consider banning Russian supplies, Price Futures Group analyst Phil Flynn said.
“The big question will be how many people will want to run out of oil before the long weekend?”
Traders were also jostling for position as options on May US crude were set to expire on Thursday.
The likelihood of an EU ban on Russian oil being accepted may be close to zero, but no one will be able or willing to say so clearly, says Vandana Hari, founder of oil market analysis provider Vanda Insights. .
“Even a continuous slash will be enough to keep the risk premium alive,” she said.
(Reporting by Mohi Narayan in New Delhi, Liz Hampton in Denver; Editing by Jason Neely, Kirsten Donovan and Jan Harvey)
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