Oil closed Friday at a six-week high on signs the market is tightening as members of the European Union moved closer toward banning Russian crude.
West Texas Intermediate futures posted its first back-to-back weekly gain in two months. The EU intends to ban Russian crude in six months and oil products by the end of the year to punish Moscow for its war on Ukraine. The bloc has proposed giving Hungary — which has pushed back against an embargo — and Slovakia an extra year to comply, people familiar with the matter said Friday.
“Crude prices just want to head higher as energy traders completely fixate over the looming European sanctions on Russian oil,” said Ed Moya, senior market analyst at Oanda. “No one wants to be on the wrong side of a major crude supply disruption headline, so whatever oil price dips that happen will be short-lived.”
The U.S. government said Thursday that it would begin buying crude to replenish the nation’s reserve. While the process could begin in the fall, the actual deliveries won’t take place until later in the future.
Oil has rallied more than 40% this year as the invasion of Ukraine upended commodity markets. This week’s advance — the third in the past four — has come despite lingering concerns that lockdowns in China to combat Covid-19 outbreaks are hurting consumption.
“Chinese oil demand has been down 1.5 million barrels per day,” due to the lockdowns, according to S&P Global Inc. Vice Chairman Dan Yergin.. But knowing China’s ways, it is expected to stage a strong rebound and that would affect all commodity prices, he added.
This week, the Organization of Petroleum Exporting Countries and its allies did announce another modest increase in supply, there’s doubt the alliance will be able to deliver the full volume.
- WTI for June delivery advanced $1.51 to settle at $109.77 a barrel in New York
- Brent for July rose $1.49 to $112.39 a barrel
Oil-product markets have also shown signs of strength this week, especially in the U.S., where nationwide holdings of gasoline and diesel have dropped. Gasoline futures are trading near a record high after a weekly gain of about 6%.
(with assistance from Sharon Cho and Alex Longley)