Oil prices edged upward on Friday, poised for their largest weekly gain in three months, as Ukrainian attacks on Russian energy infrastructure prompted Moscow to restrict fuel shipments and brought it close to cutting crude production.
Brent futures increased by 21 cents, or 0.3%, to $69.63 a barrel by 0635 GMT, while U.S. West Texas Intermediate (WTI) crude rose 32 cents, or 0.5%, to $65.30 a barrel.
“Gains were supported by ongoing Ukrainian drone strikes targeting Russian oil infrastructure, NATO’s warning to Russia it is ready to respond to future violations of its airspace and Russia’s move to halt key fuel exports,” said IG analyst Tony Sycamore.
This week’s surge marks the largest weekly increase for both benchmarks since the week ending June 13, when Brent jumped 11.7% and WTI rose 13% amid military tensions between Israel and Iran.
Deputy Prime Minister Alexander Novak confirmed that Russia will impose a partial diesel export ban through the end of the year and extend an existing gasoline export ban. A decline in refining capacity has brought Moscow closer to cutting crude output, as shortages of certain fuel grades have emerged in several regions.
“NATO’s warning of a response to further violations of its airspace has ratcheted up the tensions from the Russia-Ukraine war and raised prospects of additional sanctions on Russia’s oil industry,” noted Daniel Hynes, an analyst at ANZ.
Both Brent and WTI also reached their highest levels since August 1 earlier this week, supported by a surprise fall in U.S. weekly crude inventories and Ukraine’s ongoing attacks on Russian energy assets.
However, some gains were tempered by U.S. economic data showing GDP growth at an upwardly revised annualized rate of 3.8% in the second quarter, according to the Commerce Department’s Bureau of Economic Analysis. Stronger-than-expected data could prompt the Federal Reserve to be more cautious about further rate cuts. The Fed lowered rates by 25 basis points last week, its first reduction since December, with additional cuts signaled.
“The Kurdistan Regional Government’s announcement on Thursday that oil exports would resume within 48 hours also pressured prices,” Hynes added. “Geopolitical tensions reversed earlier losses after a landmark agreement was reached to allow the resumption of exports from Iraq’s Kurdistan, which could return up to 500kb/d to the global market.”
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