Oil rises as Russia restricts fuel sales

Tokyo — Oil prices rose on Friday as concerns that a Russian ban on fuel exports could tighten global supply outweighed fears that further US interest rate hikes could dent demand, but they were still headed for their first weekly loss in four weeks.

Brent futures climbed 50c, or 0.5%, to $93.80 a barrel by 3.50am GMT, while US West Texas Intermediate crude (WTI) futures gained 63c, or 0.7%, to $90.26 a barrel.

Both benchmarks were on track for a small weekly drop after gaining more than 10% in the previous three weeks amid concerns about tight global supply as Opec+ maintains production cuts.

“Trading remained choppy amid a tug-of-war between supply fears that were reinforced by a Russian ban on fuel exports and worries over slower demand due to tighter monetary policies in the US and Europe,” said Toshitaka Tazawa, an analyst at Fujitomi Securities.

“Going forward, investors will focus on whether the Opec+ production cuts are being implemented as promised and whether the rise in interest rates will reduce demand,” he said, predicting WTI to trade in a range of $90-$95.

Russia temporarily banned exports of petrol and diesel to all countries outside a circle of four former Soviet states with immediate effect to stabilise the domestic fuel market, the government said on Thursday.

The shortfall, which will force Russia’s fuel buyers to shop elsewhere, caused heating oil futures to rise by nearly 5% on Thursday.

“Crude oil bounced off a session low after Russia banned diesel exports, which included petrol. The action reversed a downside movement in crude markets following the hawkish Fed decision on Thursday,” said Tina Teng, an analyst at CMC Markets.

“However, mounting fears of a recession in the eurozone could continue pressuring oil prices.”

The US Federal Reserve on Wednesday maintained interest rates, but stiffened its hawkish stance, projecting a quarter-percentage-point increase to 5.50%-5.75% by year-end.

That buoyed fears that higher rates could dampen economic growth and fuel demand while boosting the US dollar to its highest since early March, making oil and other commodities more expensive for buyers using other currencies.

The Bank of England mirrored the Fed and held interest rates on Thursday after a long run of hikes, but said it was not taking a recent fall in inflation for granted.

A European Central Bank governing council member said the central bank will most likely keep interest rates stable at its next policy meeting.

Reuters