Oil prices climbed on Wednesday, headed for their highest settlement in two weeks, with supply worries hovering over the market as the war in Ukraine neared a one-month mark and U.S. crude inventories posting a weekly decline.
April natural gas
rose 0.3% to $5.203 per million British thermal units.
Supply concerns linked to Russian’s invasion of Ukraine that shows no signs of letting up, were again helping to drive gains for crude on Wednesday, with U.S. oil up 10% and Brent climbing over 11% so far this week.
“It’s a massive week for oil markets, with meetings of [European Union] leaders and a NATO summit both happening over the next few days,” said Stephen Innes, managing partner at SPI Asset Management, in a daily note. “A new wave of Russian sanctions is likely, and speculation in the press has focused on the probability of sanctions affecting oil.”
The U.S. and U.K. have already imposed bans on Russian oil, and many EU member states support a ban, but “a few key players (notably Germany and Hungary) oppose, and a decision must be unanimous,” he said.
Still, some countries may change their stance “if Russia were to further escalate its targeting of the civilian population in its war in Ukraine,” said Carsten Fritsch, analyst at Commerzbank, in a note to clients. Russia was keeping up its offense across Ukraine on Wednesday, with its forces accused of kidnapping a humanitarian convoy headed to besieged Mariupol.
Fritsch said Russia remains challenged in trying to sell its oil, with the price discount on Urals as compared with Brent now up to $27 per barrel.
“We feel oil will continue to go higher and any weakness should be bought,” Tariq Zahir, managing member at Tyche Capital Advisors, told MarketWatch.
The Russia situation and the market heading into driving season are “all bullish factors,” he said. The “only thing that can derail this upward momentum is demand destruction…or an end to the Russia invasion.”
“The “only thing that can derail this upward momentum is demand destruction…or an end to the Russia invasion.” ”
— Tariq Zahir, Tyche Capital Advisors
On Wednesday, the Energy Information Administration reported on Wednesday that domestic crude inventories fell by 2.5 million barrels for the week ended March 18.
On average, the EIA was expected to show crude inventories unchanged for the week, according to analysts surveyed by S&P Global Commodity Insights. The American Petroleum Institute on Tuesday reported a 4.3 million-barrel decrease.
The EIA also reported weekly inventory declines of 2.9 million barrels for gasoline and 2.1 million barrels for distillates. The analyst survey had shown expectations for weekly supply declines of 1.7 million barrels for gasoline and 1.4 million barrels for distillates.
Crude stocks at the Cushing, Okla., Nymex delivery hub edged up by 1.2 million barrels for the week, while stocks in the U.S. Strategic Petroleum Reserve fell by 4.2 million barrels, according to the EIA.