Oil prices rose on Friday, with benchmarks set for their steepest weekly increase since early June, as escalating Ukraine-Russia tensions and Moscow’s restrictions on fuel exports tightened supply outlook.
By 10:24 AM, Brent crude futures gained 13 cents, or 0.2 per cent, to trade at $69.55 a barrel, while US West Texas Intermediate (WTI) crude rose 22 cents, or 0.3 per cent, to $65.20 a barrel, reported Reuters. Both benchmarks are up more than 4 per cent this week, marking their biggest weekly rise since the period ending June 13.
Ukraine Attacks and NATO Warning Fuel Price Surge
Market momentum has been driven by Ukrainian drone strikes on Russian energy facilities, coupled with NATO’s warning that it is prepared to respond to any future violations of its airspace.
“Gains were supported by ongoing Ukrainian drone strikes targeting Russian oil infrastructure, NATO’s warning to Russia it is ready to respond to future violations of its airspace and Russia’s move to halt key fuel exports,” said Tony Sycamore, analyst at IG.
Russia Extends Export Bans, Faces Fuel Shortages
On Thursday, Russian Deputy Prime Minister Alexander Novak announced a partial ban on diesel exports until the end of the year and an extension of the existing gasoline export ban.
The reduced refining capacity has brought Moscow close to cutting crude output, with several Russian regions already facing shortages of specific fuel grades.
Additional Sanctions Risk Looms Over Russian Oil
According to Daniel Hynes, analyst at ANZ, NATO’s warning and Moscow’s export restrictions have heightened the risk of further sanctions on Russia’s oil industry.
Both Brent and WTI also touched their highest levels since August 1 this week, supported by a surprise decline in U.S. weekly crude inventories alongside Ukraine’s continued strikes on Russian infrastructure.
US Economic Data and Kurdistan Exports Cap Gains
Some of the upward momentum in crude was tempered by strong U.S. economic data. The Commerce Department’s Bureau of Economic Analysis reported on Thursday that U.S. GDP expanded at an upwardly revised 3.8 per cent annualized rate last quarter.
Analysts noted this could prompt the Federal Reserve to act cautiously on future rate cuts. The Fed recently lowered interest rates by 25 basis points, its first cut since December, and indicated the possibility of more reductions.
Meanwhile, the Kurdistan Regional Government announced oil exports would resume within 48 hours, pressuring prices as markets anticipated additional supply.
“Geopolitical tensions reversed earlier losses after a landmark agreement was reached to allow the resumption of exports from Iraq’s Kurdistan, which could return up to 500kb/d to the global market,” ANZ’s Hynes added.
