Oil set for biggest weekly gain in three months as Russia cuts fuel exports
FILE PHOTO: Oil pumpjacks and tanks are pictured in a farmer’s field near Kindersley, Saskatchewan, Canada September 5, 2024. REUTERS/Todd Korol/File Photo
Oil prices edged up on Friday, on track to climb more than 4 per cent for the week, as Ukraine's attacks on Russia's energy infrastructure prompted Moscow to curb fuel exports and brought it close to cutting crude output.
Brent futures climbed 21 cents, or 0.3 per cent, to $69.63 a barrel by 0635 GMT, while U.S. West Texas Intermediate (WTI) crude futures gained 32 cents, or 0.5 per cent, to $65.30 a barrel.
"Gains were supported by ongoing Ukrainian drone strikes targeting Russian oil infrastructure, NATO's warning to Russia it is ready to respond to future violations of its airspace and Russia's move to halt key fuel exports," said IG analyst Tony Sycamore.
Both benchmarks are likely to log their biggest increase since the week ended June 13 when Brent soared 11.7 per cent and WTI jumped 13 per cent as Israel and Iran traded air strikes.
Russia will introduce a partial ban on diesel exports until the end of the year and extend an existing ban on gasoline exports, Deputy Prime Minister Alexander Novak said on Thursday.
The fall in capacity to refine oil has pushed Moscow close to reducing crude output. Several Russian regions are facing shortages of certain grades of fuel.
NATO's warning of a response to further violations of its airspace has ratcheted up the tensions from the Russia-Ukraine war and raised prospects of additional sanctions on Russia's oil industry, said Daniel Hynes, an analyst at ANZ.
Both benchmarks also reached their highest levels since August 1 this week, driven by a surprise drop in U.S. weekly crude inventories as well as Ukraine's attacks on Russia's energy infrastructure.
Capping some gains, U.S. gross domestic product increased at an upwardly revised 3.8 per cent annualized rate last quarter, the Commerce Department's Bureau of Economic Analysis said in its latest estimate on Thursday.
Stronger-than-expected economic data could make the Federal Reserve more cautious about cutting interest rates. The U.S. central bank cut rates by 25 bps last week, its first cut since December, and had signalled more reductions ahead.
The Kurdistan Regional Government's announcement on Thursday that oil exports would resume within 48 hours also pressured prices.
"Geopolitical tensions reversed earlier losses after a landmark agreement was reached to allow the resumption of exports from Iraq’s Kurdistan, which could return up to 500kb/d to the global market," ANZ's Hynes said in a note to clients.
