Title: Oil firms on tight supply though EU ban on Russian oil still uncertain

May 26, 2022 12:35AM ET

By: AnalysisWatch

Oil prices rose on Thursday, continuing a cautious rally this week on signs of tight supplies as the European Union (EU) clashes with Hungary over plans to ban imports from Russia, the world's second-largest crude exporter, following its invasion of Ukraine.

Brent crude futures for July rose 40 cents, or 0.35%, to $114.43 a barrel at 12:12 AM ET.

U.S. West Texas Intermediate (WTI) crude futures for July delivery climbed 55 cents, or 0.5%, to $110.88 a barrel.

An unexpectedly large drawdown in U.S. crude inventories in the week ended May 20, which followed rising exports, boosted the market on Wednesday. Analysts said the inventory drawdown and the prospect of an EU embargo on Russian oil in retaliation for Moscow's "special military operation" in Ukraine drove prices higher.

European Council President Charles Michel said Wednesday he was confident an agreement could be reached by the next council meeting on May 30.

Hungary, however, remains an obstacle to the unanimous support needed for EU sanctions. Hungary is pushing for about 750 million euros ($800 million) to upgrade its refineries and expand a pipeline from Croatia so it can get away from Russian oil.

Even without an official ban, much less Russian oil is available to the market as buyers and trading houses avoid trading with crude and fuel suppliers from the country.

ANZ analysts pointed out that cargoes from Baltic ports are making a longer journey to Asian refineries, while shipments to the Netherlands and France have all but stopped.

A projected increase in oil production to a record high of 5.2 million barrels per day (bpd) in the Permian Basin of the United States is unlikely to close the 2 million to 3 million bpd gap created by lost Russian supply, said Vivek Dhar, commodities analyst at Commonwealth Bank.