NEW YORK: Oil prices gained over 2 percent on Wednesday as another US crude stock drawdown indicated tight supplies and investors worried about possible new Western sanctions against Russia.
Brent futures rose $2.69, or 2.4 percent, to $112.92 a barrel by 1:22 p.m. EDT (1722 GMT). US West Texas Intermediate crude rose $2.88, or 2.8 percent, to $107.12.
US stockpiles fall
US commercial crude stocks and the country’s strategic reserves both fell in the most recent week as refiners ramped up output amid global supply tightness, the Energy Information Administration said on Wednesday.
However, demand for both distillates and gasoline fell in the latest week, which could signal that high prices are starting to put a dent in fuel consumption.
Crude inventories fell by 3.4 million barrels in the week to March 25 to 410 million barrels, lowest since September 2018. The decline was much steeper than the 1 million-barrel drop that analysts had forecast in a Reuters poll.
The nation’s strategic reserve also dropped by 3 million barrels following announced sales meant to shore up worldwide supplies since Russia’s invasion of Ukraine.
The US and its allies plan new sanctions on more sectors of Russia’s economy, including military supply chains.
“We would see an additional 1 million barrels per day of Russian production at risk if relations with Europe worsen and an oil embargo is put in place, although we still see this as unlikely,” consultancy JBC Energy said in a note.
The Kremlin indicated that all of Russia’s energy and commodity exports could be priced in roubles, as President Vladimir Putin seeks to make the West feel pain for the sanctions.
In response to possible Russian gas supply cuts, Germany triggered an emergency plan to manage gas supplies. Other European countries also took steps to conserve gas.
Keeping the market tight, major oil producers are likely to stick to their scheduled output target increase of about 432,000 bpd when OPEC+ — the Organization of the Petroleum Exporting Countries and allies including Russia — meets on Thursday, several sources close to the group said.
But weakening demand in China is pressuring oil prices, as the country has tightened mobility restrictions and COVID-19-related lockdowns in multiple cities including the financial hub of Shanghai.
US data showed private employers maintained a brisk pace of hiring in March, leading investors to worry that a possible rapid rise in interest rates could hurt economic growth and fuel demand.