Oil Prices Rise as Supply Risks Outweigh Economic Concerns, Reports Reuters

By Scott DiSavino

NEW YORK (Reuters) – Oil prices saw a slight increase on Friday, buoyed by a forthcoming European Union ban on Russian oil and the easing of COVID-19 lockdowns in China, which alleviated concerns about declining economic growth impacting demand.

Futures for July delivery increased by 51 cents, or 0.5%, closing at $112.55 a barrel. The U.S. West Texas Intermediate (WTI) crude for June rose by $1.02, or 0.9%, closing at $113.23, marking its final day as the front-month contract.

WTI achieved its fourth consecutive week of gains, the first time since mid-February, while Brent crude also saw a roughly 1% increase this week after a decline of about 1% in the previous week.

The more actively traded WTI contract for July was up approximately 0.4% at $110.28 a barrel.

"The risks remain tilted to the upside due to the reopening in China and ongoing efforts towards an EU embargo on Russian oil," stated Craig Erlam, a senior market analyst at OANDA.

In China, Shanghai maintained its plan to end a prolonged city-wide lockdown on June 1, despite reporting its first new COVID-19 cases outside of quarantined areas in five days. The energy market anticipates that the easing of some health restrictions in Shanghai will enhance energy demand, as China is the largest crude importer globally.

The EU aims to finalize a deal on a proposed ban of Russian crude imports, which would include exceptions for member states that are heavily reliant on Russian oil, such as Hungary.

The consultancy BCA Research noted that the chances of an EU embargo being enacted sooner rather than later have increased following Germany’s rapid success in reducing its imports of Russian oil by more than half.

In Germany, major businesses are planning an auction system to help ration available supplies in case Russia shuts off its gas delivery, although smaller firms may face challenges under this system.

In the U.S., energy companies added oil rigs for the ninth consecutive week, according to the Baker Hughes rig count, as mainly smaller producers are responding to high prices and government encouragement to increase output. The rig count serves as a barometer for future production growth.

Despite soaring gasoline prices, Americans continued to drive, with national average prices for regular unleaded gasoline reaching a record $4.59 per gallon on Friday, according to the auto club AAA.

In India, oil imports in April hit a three-and-a-half-year high, as the country, the third-largest oil importer and consumer globally, increased purchases of discounted Russian oil to support demand recovery and combat elevated prices.

Meanwhile, in Norway, crude oil production in April fell short of official forecasts by 10.6%, although gas production aligned with expectations.