• Saturday, July 20, 2024
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Oil rises towards $108, supply worries underpin prices


Brent crude oil rose towards $108 a barrel on Thursday, supported by worries about potential supply disruption due to the possibility of Western sanctions on Russia’s energy sector.

Data from the United States showing growth of the economy also fed into stronger prices.

The United States and the European Union agreed on Wednesday to work together on preparing possible further economic sanctions in response to Russia’s actions in Ukraine and to make Europe less dependent on Russian gas.

U.S. President Barack Obama warned at a news conference that “the isolation will deepen, sanctions will increase” for Russia, the world’s biggest oil producer, if Moscow continues its current course.

Brent for May delivery was up 53 cents at $107.56 a barrel at 1246 GMT.

Analysts said that the uncertainty on Russia had led to a significant risk premium on the oil price.

“If you put the Russia stuff aside, we’d be at around $105 (per barrel) due to seasonal fundamentals of lower demand because of refinery maintenance and lower gasoil consumption,” said Andy Sommer, an analyst at Axpo Trading in Dietikon, Switzerland.

U.S. crude for May delivery was up 85 cents at $101.13 a barrel, following a $1.07 rise in the previous session. It was on track for its highest close in three weeks.

The contract was supported by a 1.33 million barrel fall in oil stocks at the Cushing, Oklahoma storage hub, the delivery point for U.S. crude futures.

The January start-up of TransCanada’s 700,000 barrel per day (bpd) Gulf Coast pipeline accounted for the drop at Cushing. But a surge in crude stocks in the U.S. Gulf Coast to a record high suggested that the largest U.S. refinery hub was not able to use all the supply from Cushing.

Crude oil inventories nationwide rose by 6.6 million barrels, higher than analysts’ expectations for a 2.7 million barrel build, with most of the rise on the Gulf Coast.

Refinery crude runs rose by 141,000 bpd as utilization rates edged up 0.4 percentage point, even while many refiners were undergoing maintenance.

“We had anticipated a far greater impact of seasonal refinery maintenance on crude stocks but still expect a deeper reduction in crude demand from refinery maintenance to emerge over the next month,” Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas, said in a note.


An improving outlook for demand in the world’s largest oil consumer also supported prices.

The U.S. economy grew a bit faster than previously estimated in the fourth quarter, data showed, while the number of Americans filing new claims for unemployment benefits unexpectedly fell last week and touched its lowest level in nearly four months.

Iran’s oil exports have stayed above levels allowed under Western sanctions for a fifth month, according to sources who track tanker movements.

Supporting prices, supply was low from Libya and Nigeria. Oil theft is likely to push Nigeria off its spot as top African crude oil exporter in May, when exports could fall to their lowest since records began in 2009.

In Britain, Murphy Oil was preparing to exit British refining next month with the sale of its Milford Haven plant and retail assets to private equity fund Greybull Capital for over $500 million, sources close to the talks told Reuters.