Oil advanced for a third day, bookending another tumultuous week of trading as investors weigh the prospect of a European Union ban on Russian crude imports and uncertainty over China’s virus resurgence.
West Texas Intermediate futures rose above $107 a barrel, but are still set for the first weekly decline in three. Some EU nations said the bloc may have to consider delaying the ban on Russian oil if it can’t get Hungary to agree on the embargo. Beijing authorities have denied rumours that the capital will go into lockdown, as virus restrictions in Shanghai drag on.
Oil is up more than 40% this year as economies rebound from the pandemic, although China’s virus outbreak and Russia’s war in Ukraine have contributed to choppy trading since late February. Global benchmark Brent crude remains in a bullish backwardation structure, signalling a tight market.
“Risks are increasing that Brent crude will once again test the upside of its recent range around $116 a barrel,” said Jeffrey Halley, a senior market analyst for Oanda Asia Pacific Pte. “The squeeze on diesel supplies and distillates globally is another supportive factor.”
Investors are assessing the impact of shrinking American fuel stockpiles ahead of the summer driving season, along with the prospect for aggressive monetary tightening after the US consumer-price index for April increased more than analysts were expecting. The war in Ukraine has fanned inflation globally.
WTI for June delivery rose 1.1% to $107.33 a barrel on the New York Mercantile Exchange at 9:44 a.m. in Singapore.
Futures are down 2.2% this week.
Brent for July settlement gained 1.3% to $108.85 a barrel on the ICE Futures Europe exchange.
Brent’s prompt timespread was $1.50 in backwardation compared with $1.34 at the start of the week
EU nations said a delay to the Russian oil ban would allow the bloc to proceed with the rest of a proposed sanctions package. Governments are still aiming for a deal on the full package, including a phased-in oil ban, by Monday, when foreign ministers meet in Brussels, according to diplomats.
Russia’s oil revenues are up 50% this year even as many buyers shun its crude due to the invasion, with the EU the largest market in April, the International Energy Agency said in its monthly report on Thursday.