Oil notched a weekly gain as traders weighed a global supply deficit, a potential ban on Russian oil from the EU and China’s latest COVID-19 lockdowns.
West Texas Intermediate (WTI) crude for May delivery on Friday gained US$2.70 to settle at US$106.95 per barrel, rising 8.8 percent for the week.
The June contract for the global benchmark Brent crude on Friday added US$2.92 to settle at US$111.70 per barrel. The contract rose 8.7 percent weekly.
Photo: Reuters
Oil rallied on Thursday afternoon after a report that the EU is moving toward adopting a phased-in ban on Russian oil.
Russian President Vladimir Putin earlier this week vowed to continue the invasion of Ukraine, pointing to a prolonged disruption of Russia’s energy exports.
Additionally, the International Energy Agency said in a report that OPEC+ members provided only 10 percent of their promised supply increases last month.
In the US, crude stockpiles jumped more than 9 million barrels last week, with over one-third of the build attributed to the shift of strategic oil reserves to commercial inventories. At the same time, most stocks of refined products fell, prompting a spike in so-called crack spreads — the rough profit from turning crude into fuel.
“Traders realize a good portion of that came from the strategic reserve, which now sets [sic] at 20 year inventory lows,” BOK Financial Corp senior vice president of trading Dennis Kissler said. “Crude storage remains 60.45 million barrels below the five-year average which should keep the buyers active on extreme sell offs.”
The oil market has seen a tumultuous period of trading since Russia invaded its neighbor in late February. A recent reserve release by the US and its allies, along with a virus resurgence in China, has weighed on prices in the past few weeks.
Yet there are some signs of easing COVID-19 restrictions and China’s central bank is expected to take measures to help bolster a faltering economy.
“Government energy intervention, the perceived self-shunning of Russian crude and the erratic buying patterns in recent weeks have all altered the near-term path,” RBC Capital Markets analyst Mike Tran said.
Trading looks “volatile and sloppy over the near term as the market digests the onslaught of 240 million barrels of crude unleashed from strategic reserves.”
To be sure, the market is still in the grips of a liquidity crunch sparked by surging volatility after a spike toward US$140. Open interest in WTI futures fell to the lowest since 2016 on Wednesday, while traders are using options strategies as a way of effectively raising cash in the face of limited sources of capital.
Elsewhere, Kazakhstan expects its main oil-export route via Russia to restore full operations late this month, the country’s energy minister said.
The nation said it remains concerned about the possible impact of Western sanctions or shipping issues on the flow of crude.
Additional reporting by staff writer
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