- S. crude stocks drop by over 7 million barrels
- Russian supply set to be highly curbed by EU sanctions
- Russia sees energy export revenue climbing nearly 40%
Oil prices climbed on August 18 as hefty U.S. fuel consumption data and expected drops in Russian supply later this year cancelling concerns that a likely recession in developed economies could dampen demand.
Brent crude futures rose $1.80, or 1.9%, to $95.45 per barrel by 1414 GMT. U.S. crude futures climbed $1.56, or 1.8%, to $89.67 per barrel. Prices jumped over 1% during the prior session, even though Brent at one point sank to its lowest level since February, as signs of a downturn rose in some places.
British consumer price inflation surpassed 10% last month, its largest since February 1982, extending a squeeze on households, while fuel export controls and China COVID-19 lockdowns suppressed demand.
Supporting prices, U.S. crude stocks (USOILC=ECI) dropped by 7.1 million barrels in the week to Aug. 12, according to Energy Information Administration (EIA) data, compared with expectations for a 275,000-barrel fall, as exports reached 5 million barrels per day (bpd), the biggest on record.
Sanctions by the European Union on Russian exports could completely tighten supply when bans on seaborne crude and products imports into the bloc mount in the coming months and push up prices, analysts warn.
Consultancy BCA research said in a note:
“The EU embargoes will force Russia to shut in around 1.6 million barrels per day (bpd) of output by year-end, rising to 2 million bpd in 2023. EU embargoes on Russian oil imports will significantly tighten markets and lift Brent to $119 a barrel by year-end.”
Russia, however, expects increasing output and exports until the end of 2025, an economy ministry document assessed by Reuters showed, saying that revenue from energy exports will climb by 38% in 2022, partly because of larger oil export volumes.
The market is also expecting developments from talks to renew Iran’s 2015 nuclear deal with world powers, which could ultimately result in a rise in Iranian oil exports.
Craig Erlam, senior market analyst at Oanda in London, stated:
“We may be seeing traders taking a more cautious approach considering how close a decision on the Iran nuclear deal appears to be. There remains plenty of doubt that it will get over the line but if it does, that could be the catalyst for another move lower.”