Oil Gains 5% For The Week As EU Bans Dominate Crude Trading Behaviour

All but forgotten are Biden's oil buybacks and China's Covid crackdowns: File Image/Pixabay

The European Union’s announcement earlier this week of tough bans of crude from Russia for its invasion of Ukraine continued to dominate trading behaviour on Friday, with the outcome that two key benchmarks logged more daily gains as well as another round of weekly gains, to the tune of about 5 percent.

West Texas Intermediate added $1.51, or 1.4 percent, to $109.77 per barrel, while Brent rose $1.49, or 1.3 percent, to settle at $112.39 per barrel.

For the week, WTI gained about 5 percent, Brent nearly 4 percent.

Phil Flynn, senior market analyst at Price Futures Group Inc., said, “In the near term the fundamentals for oil are bullish and it is only fears of an economic slowdown in the future that is holding us back

“Tougher sanction on Russia looks to be more bullish as the EU is moving closer to cut off Russian oil and the U.S. moves to further clamp down on Russia.”

Stephen Brennock, senior analyst at PVM Oil Associates Ltd., added, “The looming EU embargo on Russian oil has the makings of an acute supply squeeze; there is now growing anxiety that Europe might run out of diesel.”

Still, the effectiveness of the embargo could be compromised: Viktor Orban, prime minister of Hungary, rejected the EU’s proposed ban as it stands, claiming it risked ruining its united front against Russia if it tries to impose the bans by the end of this year as hoped for; Orban wants a five year exemption for his country before giving the bans his blessing.

Not helping matter and ignoring calls from Western nations to boost output, the Organization of the Petroleum Exporting Countries (OPEC) and allies stayed firm with its intention to raise its June output target by 432,000 barrels per day (bpd) – and experts think the volume will be much lower.

Jeffrey Halley, senior market analyst Asia Pacific at OANDA, said, “There is zero chance of certain members filling that quota as production challenges impact Nigeria and other African members.”

Meanwhile, all but forgotten in Friday’s trading was the U.S. Energy Department’s plan to begin purchasing oil to refill the nation’s emergency reserve, a process that will involve a call for bids for 60 million barrels this fall, though the actual purchases won’t take place until sometime in the future, according to a person familiar with the matter.

The plan follows Washington ordering the release of 180 million barrels of oil per day for six months in another effort to tame oil and gas prices – which from the consumer’s perspective remain unchanged despite the effort.