Oil advances from two-week low on lingering supply concerns

Oil climbed from a two-week low on concerns that the European Union’s latest sanctions on Russian fuel could exacerbate the market tightness that the US is trying to alleviate with additional sales.

West Texas Intermediate rose as much as 1.6%, after dropping 7% in the previous three sessions on the US attempts to tamp down prices. The EU’s moves on Russian petroleum could send shockwaves through the global tanker market, and have already caused some Indian refiners to halt spot purchases before the latest sanctions take effect early December.

US officials are planning to release 15 million barrels from the country’s emergency reserves, and may consider significantly more this winter. It’s the final tranche of oil from a program the White House began in the spring to release a total of 180 million barrels of crude. It’ll also seek to replenish its emergency stockpiles by buying when WTI is priced at or below $67 to $72 a barrel.

Crude has rebounded this month after losing more than 20% last quarter as the Organization of Petroleum Exporting Countries and its allies agreed on the biggest production cut since 2020. OPEC+ defended its move, saying it was justified by the growing risk of a global recession, while Chinese oil demand is still in limbo on virus lockdowns amid concerns of a global economic slowdown.

“The EU sanctions will hurt deliveries, and we also need to consider whatever supply side retribution Russia could take in light of the sanctions, which are two factors driving prices, while the other is how the SPR gets replenished,” said Stephen Innes, managing partner at SPI Asset Management. “We could be in for an uptick in volatility.”

Prices:

• WTI for November delivery advanced 1% to $83.64 a barrel on the New York Mercantile Exchange at 1:15 p.m. in Singapore.
• The November contract expires on Thursday. More-active December futures rose 73 cents to $82.80.
• Brent for December settlement gained 0.4% to $90.40 a barrel on the ICE Futures Europe exchange after slumping 1.7% on Tuesday.
• The EU’s eighth round of sanctions could end up affecting a swath of tankers. It states that if a vessel owner transports Russian crude above an agreed price threshold, their ship would be banned from getting EU services needed to ship the commodity, such as insurance, “in the future.”

Adding to supply concerns, the restoration of full oil output at the Kashagan field in Kazakhstan has been delayed as the operator keeps working on a solution to a gas leak, people familiar with the matter said. Kazakhstan is Central Asia’s largest producer and one of the main alternatives to Russian crude for European buyers.

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