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NEW YORK, April 27 (Reuters) – Oil prices edged higher on Wednesday on lingering worries about tight global supplies, underscored by a further drop in U.S. distillate and gasoline inventories.
The market rebounded late in the session after losing ground for most of the day, partly on the strength of the dollar and as China grapples with new coronavirus outbreaks that are undermining demand. However, Russia’s decision to cut off gas shipments to two European countries added to general concerns about limited energy supplies.
Brent crude futures rose 33 cents to $105.32 a barrel, while U.S. West Texas Intermediate crude rose 32 cents to $102.02 a barrel.
The US Energy Information Administration said crude inventories rose just 692,000 barrels last week, below expectations, while distillate inventories, which include diesel and jet fuel, fell to their lowest since May 2008.
Falling distillate inventories helped push U.S. fuel oil futures to an all-time closing high of over $4.67 a gallon. Refiners turn crude into diesel, jet fuel and other products, and U.S. refiners have been operating at high rates to meet demand, especially in Europe, a heavy user of diesel fuel.
Energy markets around the world are facing massive supply disruptions following Russia’s invasion of Ukraine and subsequent sanctions imposed on Moscow by the United States and its allies.
Britain’s Shell said it would no longer accept refined oil mixed with Russian products, according to business documents, while Exxon Mobil said it had declared force majeure for its Sakhalin-1 operations in the extreme east of Russia. Read more
This week, Moscow stepped up its use of energy as a cudgel against countries opposed to the invasion. Russian energy giant Gazprom (GAZP.MM) said on Wednesday it had cut gas supplies to Bulgaria and Poland. Read more
“Russia wants ruble payments for gas, and the fear is that before long it wants to do the same with oil,” said Claudio Galimberti, senior vice president of analytics at Rystad.
European Commission chief Ursula von der Leyen said Russia was using fossil fuels to blackmail the EU, but added that the era of Russian fossil fuels in Europe was coming to an end.
Earlier in the day, the market had come under pressure from a rally in the dollar, which had hit a five-year high. Since most oil trade is in dollars, a rising greenback makes oil purchases more expensive for holders of other currencies.
China’s central bank has said it will step up support for monetary policy as Beijing races to stamp out a budding outbreak of COVID-19 in the capital and avoid the same kind of debilitating citywide lockdown as Shanghai. undergone for a month. Read more
Additional reporting by Florence Tan in Singapore; edited by David Evans, Marguerita Choy and David Gregorio
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