Oil rises on U.S. crude inventory data and tight supply outlook

Oil prices rose on Thursday as strong U.S. fuel consumption data and expected Russian supply cuts later in the year offset concerns that a possible recession in developed economies could undermines demand.

Brent crude futures climbed $1.27, or 1.4%, to hit $94.92 a barrel at 11:17 GMT. U.S. crude futures gained 93 cents, or 1.1%, to $89.04 a barrel.

Prices rose more than 1% in the previous session, although Brent at one point fell to its lowest level since February as signs of a slowdown mounted in some places.

UK consumer price inflation rose above 10% in July, its highest since February 1982, mounting pressure on households, while in China COVID-19 lockdowns and fuel export controls have dampened demand.

Supporting prices, U.S. crude inventories (USOILC=ECI) fell 7.1 million barrels in the week to August 12, according to data from the Energy Information Administration (EIA), against forecasts. a drop of 275,000 barrels, as exports reached 5 million barrels per day (bpd), the highest on record.

European Union bans on Russian exports could significantly tighten supply when restrictions on imports of crude and products transported by sea into the bloc intensify in the coming months and drive up prices, warn analysts.

“EU embargoes will force Russia to shut down around 1.6 million barrels per day (bpd) of production by the end of the year, rising to 2 million bpd in 2023,” the firm said. BCA research consultancy in a note. “EU embargoes on Russian oil imports will significantly tighten markets and push Brent to $119 a barrel by the end of the year.”

Russia, however, plans to increase production and exports until the end of 2025, according to an economy ministry document reviewed by Reuters, indicating that energy export revenues will increase by 38% this year. , partly due to higher oil export volumes.

The market is also awaiting developments in talks to revive the 2015 nuclear deal between Iran and world powers, which could eventually lead to an increase in Iranian oil exports.

“We may be seeing traders taking a more cautious approach given the proximity of a decision on the Iran nuclear deal,” said Craig Erlam, senior market analyst at Oanda in London. “There remains a lot of doubt that he will cross the line, but if he does, it could be the catalyst for another move down.

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