LONDON: Oil prices edged lower on Friday (May 27) but were on track for weekly gains, supported by the prospect of a tight market due to rising gasoline consumption in the United States in summer, and also the possibility of an EU ban on Russian oil.
Brent crude was down 20 cents, or 0.2 per cent, at US$117.20 at 11.04am GMT (7.04pm, Singapore time), but was on track for a gain of about 4 per cent this week.
US West Texas Intermediate (WTI) crude fell 40 cents, or 0.4 per cent, to US$113.69 a barrel. WTI is set for a weekly gain of about 0.5 per cent.
"Oil prices have risen to the highest level since end of March, benefiting from renewed declines in US oil inventories," said UBS analyst Giovanni Staunovo.
US gasoline stocks fell by 482,000 barrels last week to 219.7 million barrels, US Energy Information Administration said on Wednesday. The start of summer driving season in the United States normally entails increased consumption.
"The US driving season and strong travel demand should help (prices). With supply growth lagging demand growth, the oil market is likely to stay undersupplied. Hence, we remain positive in our outlook for crude prices," Staunovo added.
Both benchmark crude contracts were also supported as the European Commission continued to seek unanimous support of all 27 EU member states for its proposed new sanctions against Russia, with Hungary posing a stumbling block.
A top Hungarian aide said the country needed three-and-a-half to four years to shift away from Russian crude and make huge investments to adjust its economy.
Hungary could not back the EU's proposed oil embargo until there was a deal on all issues, the aide said.
"We believe that a sharp contraction in Russian oil exports could trigger a full-blown 1980s style oil crisis and push Brent well past US$150 per barrel," Bank of America said in a note.
Oil prices jumped after the Iranian revolution in 1979 and a long war between Iran and Iraq (1980 to 1988), although a global recession soon hindered fuel demand and oil prices dropped back.
Prices have gained about 50 per cent so far this year.
OPEC+ is set to stick to last year's oil production deal at its Jun 2 meeting and raise July output targets by 432,000 barrels per day, six OPEC+ sources told Reuters.
The OPEC+ members would thereby rebuff Western calls for a faster increase to lower surging prices.