Oil rises but set for weekly loss as traders assess supply

FILE PHOTO: A general view shows a local oil refinery behind residential buildings in Omsk, Russia February 10, 2021. REUTERS/Alexey Malgavko

BENGALURU — Oil prices rose Friday but are still on track for a weekly decline as traders weighed headlines around Russia and Iran suggesting more possible supply disruptions, versus those promising remedies in a tight market.

Benchmark futures have soared since Russia’s invasion of Ukraine. Early this week they hit their highest levels since 2008, then pulled back sharply as some producing countries signaled they may boost supply.

Brent crude futures rose $1.97, or 1.8%, to $111.30 a barrel by 11:49 a.m. ET (1649 GMT) after hitting a session low of $111.74. U.S. West Texas Intermediate (WTI) crude futures rose $2.29, or 2.2%, to $108.31 a barrel, off the session low of $104.48.

U.S. President Joe Biden said the G7 industrialized nations will revoke Russia’s “most favored nation” trade status, and announced a U.S. ban on Russian seafood, alcohol, and diamonds. The United States banned Russian oil this week.

Supply concerns grew when talks to revive the 2015 Iran nuclear deal on Friday faced the threat of collapse after a last-minute Russian demand forced world powers to pause negotiations.

U.S. rig data from energy services firm Baker Hughes Co showed drillers added 13 oil and natural gas rigs, bringing the total to 663, the ninth increase in 10 weeks.

The data is an early indicator of future output. U.S. government officials have called on domestic and global producers to ramp up output.

Brent, which rose over 20% last week, was on track for a weekly fall of around 5.6% after hitting $139.13 on Monday. U.S. crude was headed for a weekly drop of around 6.4% after touching a high of $130.50 on Monday. Both contracts last touched these price peaks in 2008.

This week, the Russia-Ukraine conflict pushed the United States and many Western oil firms to stop buying Russian oil. There was talk of potential supply additions from Iran, Venezuela, and the United Arab Emirates.

“We have a close eye on the pressure valves that will absorb the supply shock,” said UBS head of economics Norbert Ruecker.

In the near term, supply gaps are unlikely to be filled by extra output from members of the Organization of the Petroleum Exporting Countries and allies, together called OPEC+, given Russia is part of the grouping, Commonwealth Bank analyst Vivek Dhar said.

Some OPEC+ producers, including Angola and Nigeria, have struggled to meet production targets, limiting the group’s ability to offset Russian supply losses.

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