Friday’s oil prices rose by more than $1 due to expectations that Russian crude supplies would drop. This helped to offset concerns about a slowing of U.S. fuel demand growth, as a looming Arctic hurricane threatens travel this holiday season.
Brent crude oil rose 0.8% to $81.64 per barrel at 0440 GMT. U.S. West Texas Intermediate crude (WTI), however, was $78.27 per barrel up 78cs or 1%.
The highs were $82.17 (and $78.77) respectively earlier in the session. Brent was up 3.3%, while WTI rose 5.4%. Both contracts are on track for the second week of gains.
According to Reuters calculations and traders, Russia’s Baltic oil exports may fall 20% by December compared with the month before. This is because the European Union (and G7) nations imposed sanctions on Russia and a price limit for Russian crude starting Dec. 5.
Russia could reduce oil production by 5% to 7% by 2023, as it reacts to oil price caps by halting oil sales to countries that support them. This was according to RIA news agency.
Edward Moya, an OANDA analyst said that crude oil prices have risen because energy traders are focusing on Moscow’s reaction to the Russian price cap and not on the thousands of cancellations that could disrupt holiday travel.
Over 4,400 U.S. flight cancellations occurred in two days due to the snowstorm. This coincides with the holiday season which some believe could be the busiest.
Oil prices settled down on Thursday as airlines were canceled and flights were canceled. Also, the snowstorm could disrupt motorists’ plans for travel during Christmas and New Year. This will result in a decrease in gasoline consumption.
Heating oil could see an increase in demand as extreme weather can cause power outages.
As U.S. crude oil inventories drop and winter storms strike the U.S. cold temperatures will continue to spread southward into Texas, Florida, and other eastern states. According to Leon Li of CMC Markets analyst, heating oil demand will rise.”
U.S. crude oil stocks dropped more than anticipated in the week ending Dec. 16, as imports fell sharply. The Energy Information Administration reported that inventories decreased by 5.9 million barrels to 418.2 million barrels, compared to forecasts of a drop of 1.7 million barrels.
However, rising COVID-19 rates in China’s No.2 oil consumers have slowed oil prices. There are concerns over further global rate increases and that the recession will reduce fuel consumption.
Moya, OANDA’s chief economist said that China is the biggest risk to oil markets. He also stated that optimism was still high about China’s reopening and eventual increase in demand.