Oil firms on tight supply though EU ban on Russian oil still uncertain -Breaking
MELBOURNE, Reuters – On Thursday oil prices rose, extending a cautious rally on tight supply signs. Meanwhile, the European Union (EU), is arguing with Hungary about plans to ban imports of Russia (the second largest crude exporter in the world) after its invasion of Ukraine.
The July futures settled at $114.10/barrel, an increase of 7 cents (or 0.1%) as of 0142 GMT
U.S. West Texas Intermediate crude futures rose 22 cents or 0.2% to $110.55 per barrel for July delivery.
On Wednesday, the market saw a bigger than expected drawdown of inventories during the week leading up to May 20. It was triggered by record exports and boosted the stock market. Analysts believe that the potential EU embargo of Russian oil by the EU in response to Moscow’s “specially military operation” in Ukraine was driving up prices.
Vivek Dhar, a commodities analyst at Commonwealth Bank, stated that the main driver of this ban is from EU on Russian oil imports.
Charles Michel of the European Council stated on Wednesday that he was confident an agreement could be reached prior to May 30, council’s next meeting.
Hungary is still a blocker to EU sanctions’ unanimous support. Hungary seeks to raise about 750million euros (800 million dollars) in order to improve its oil refineries and to expand the pipeline to Croatia, to allow it to move away from Russian crude.
Even though there is no formal ban on Russian oil, it’s much more available than before because buyers and traders avoid Russian fuel and crude suppliers.
ANZ analysts indicated that cargoes arriving from Baltic ports would take longer routes to Asian refineries. Deliveries to France, the Netherlands and France were all almost canceled.
CBA’s Dhar stated that a forecast rise in US oil production to record levels of 5.2million barrels per daily (bpd), in the Permian basin of the United States will not be enough to fill the gap of 2 million-3 million bpd due to lost Russian supplies.
However, oil market volatility this week has been limited by COVID-19 lockdowns, increasing concern about China’s declining fuel demand and concerns about global inflation.
($1 = 0.9348 euros)