Oil Extends Gain as Investors Track Russia Tensions, Supply Risk
(Bloomberg) -- Oil extended the biggest gain in a week, as US President Donald Trump ramped up his rhetoric against Russia and traders watched for supply disruptions from the OPEC+ member.
Brent rose toward $68 a barrel after gaining 1.6% on Tuesday, while West Texas Intermediate was near $64. Trump said he thought NATO nations should shoot down Russian aircraft that violated their airspace and struck a more sympathetic tone on Ukraine’s chances of winning the war. He also reiterated the need for Europe to cut its energy purchases from Moscow.
“China and India are the primary funders of the ongoing war by continuing to purchase Russian oil,” Trump said in a speech at the United Nations General Assembly in New York on Tuesday. “But inexcusably, even NATO countries have not cut off much Russian energy and Russian energy products.”
Meanwhile, Russia mulled restrictions on diesel exports for some companies following a spate of attacks by Ukrainian drones on its energy infrastructure, including pipeline facilities. The nation’s supply has been in focus amid global efforts to pressure Moscow into negotiating an end to the conflict.
A reduction in Russian diesel exports is “bullish crude” as it may mean refiners in other parts of the world would need to run harder to balance the market, especially during winter when demand for the fuel is at its highest, said Mukesh Sahdev, founder and chief executive officer of analysis firm Xanalysts in Sydney. A “product price rally will happen first and then lead to a crude price rally,” he said.
Gasoil, a category that includes diesel, settled 2.4% higher in Europe on Tuesday, its biggest gain in three weeks.
Oil’s little changed this month as traders weigh a bearish fundamental outlook against long-running geopolitical tensions. On the supply front, Iraq is finalizing a deal to restart crude exports from its Kurdistan region following a two-year halt. That could bring about 230,000 barrels-a-day back to the international market, exacerbating a looming glut.
In the US, an industry report showed crude inventories fell 3.8 million barrels last week, although holdings of distillates increased. Official data is due later on Wednesday.
Some market metrics point to strengthening, with Brent’s prompt spread — the difference between its two closest contracts — at 66 cents a barrel in backwardation, double the level two weeks ago. Meanwhile, the difference between two closest December contracts widened to $1.48 a barrel from less than $1 a fortnight ago.
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