Oil gains 1.5% and posts another weekly gain on supply issues

Workers walk as oil pumps are seen in the background at the Uzen oil and gas field in the Mangistau region of Kazakhstan November 13, 2021. REUTERS/Pavel Mikheyev

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  • EU modifies Russian sanctions plan to convince reluctant states
  • US plans to buy back 60 million barrels for emergency stockpile
  • US Senate committee passes antitrust bill putting pressure on OPEC+
  • Benchmarks win for the second week in a row

HOUSTON, May 6 (Reuters) – Oil prices rose nearly 1.5% on Friday, posting a second straight weekly increase as looming European Union sanctions on Russian oil raised fears of a tightening offer and prompted traders to ignore concerns about global economic growth.

Brent crude futures rose $1.49, or 1.3%, to settle at $112.39 a barrel. U.S. West Texas Intermediate (WTI) crude rose $1.51, or 1.4%, to end at $109.77 a barrel.

“In the short term, oil fundamentals are bullish and it’s only fears of a coming economic slowdown that’s holding us back,” said Price Futures Group analyst Phil Flynn.

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For the week, WTI gained around 5%, while Brent gained almost 4% after the EU imposed an embargo on Russian oil as part of its toughest set of sanctions yet. the conflict in Ukraine.

The EU is fine-tuning its sanctions plan, hoping to win over reluctant states and gain the necessary unanimous backing from all 27 member countries, three EU sources told Reuters. The initial proposal called for an end to European imports of Russian crude oil and petroleum products by the end of this year. Read more

“The impending EU embargo on Russian oil has the makings of an acute supply shortage. In any case, OPEC+ is in no mood to help, even if the rise energy prices are driving harmful levels of inflation,” said PVM analyst Stephen Brennock.

Ignoring calls from Western countries to increase production further, the Organization of the Petroleum Exporting Countries, Russia and Allied Producers (OPEC+), stuck to its plan to raise its June production target by 432,000 barrels per day. . Read more

However, analysts expect the group’s actual production increase to be much lower due to capacity constraints. Read more

“There is no chance that some members will meet this quota as production challenges impact Nigeria and other African members,” said Jeffrey Halley, senior Asia-Pacific market analyst at OANDA.

On Thursday, a US Senate panel introduced a bill that could expose OPEC+ to lawsuits for collusion over rising oil prices. Read more

On the supply side, the number of U.S. oil rigs, an early indicator of future production, rose by five to 557 this week, the highest since April 2020. []RIG/U]

Fund managers reduced their net long positions in U.S. crude futures and options in the week to May 3, the U.S. Commodity Futures Trading Commission (CFTC) said.

Investors expect demand from the United States to rise this fall as Washington unveiled plans to buy 60 million barrels of crude to replenish emergency stocks. Read more Still, signs of a weakening global economy fueled demand concerns, limiting oil price gains.

On Thursday, the Bank of England warned that Britain risked a double whammy of a recession and double-digit inflation. He raised interest rates by a quarter of a percentage point to 1%, their highest level since 2009. Read more

China’s strict COVID-19 restrictions are creating headwinds for the world’s second-largest economy and top oil importer. Read more

Beijing authorities said all non-essential services would be closed in its largest district of Chaoyang, which is home to embassies and major offices. Read more

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Additional reporting by Rowena Edwards in London, Florence Tan in Singapore and Laura Sanicola in New York Editing by Marguerita Choy and David Gregorio

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