By Marcy de Luna
HOUSTON (Reuters) – Oil prices rose on Friday as signs of market shortages supported prices ahead of the US Memorial Day holiday weekend, the unofficial start of the peak summer demand season in the United States.
In addition, European Union countries are negotiating a deal on Russian oil sanctions that would ban supplies but delay sanctions on oil delivered by pipeline to persuade Hungary and other landlocked member states, officials said.
Hungary’s opposition to oil sanctions – and the reluctance of a handful of other countries – has stalled the EU-27’s implementation of a sixth package of sanctions against Russia over its invasion of Ukraine.
“We believe a sharp drop in Russian oil exports could trigger a full-blown 1980s-style oil crisis and push Brent well above $150 a barrel,” Bank of America said in a statement.
A deal could be reached by envoys of European Union governments in Brussels on Sunday, in time for their leaders to endorse it at their May 30-31 summit, officials said.
Brent crude was up 1.18 cents, or 1.0%, to $118.58 at 1659 GMT, while US West Texas Intermediate (WTI) crude was up 39 cents, or 0.3%, to $114.48 a barrel rose.
“US driving season and strong travel demand should help (prices). With supply growth lagging demand growth, the oil market is likely to remain undersupplied. Therefore, we remain positive on our outlook for crude oil prices,” said UBS analyst Giovanni Staunovo.
US gasoline inventories have fallen over the past week despite higher refinery runs, data from the US Energy Information Administration showed on Wednesday. The start of the summer driving season in the United States usually brings increased consumption.
Concerns that Iran’s paramilitary Revolutionary Guards seized two Greek oil tankers in the Persian Gulf on Friday, coupled with a long US bank holiday weekend, are making investors nervous about going short on the weekend, said Phil Flynn, an analyst at Price Futures Group .
“We see assumptions that demand for oil and gas may be stronger as the stock market suggests fears of a recession may be overdone,” Flynn said.
Meanwhile, Russian President Vladimir Putin told Austrian Chancellor Karl Nehammer on Friday that Moscow will honor its natural gas delivery commitments.
“He also raised the issue (and said) that all deliveries will be fully completed,” Nehammer said.
Oil prices rose after the 1979 Iranian revolution and a long Iran-Iraq war (1980-88), although a global recession soon hampered fuel demand and oil prices fell back.
Prices are up about 50% so far this year.
(Reporting by Marcy de Luna in Houston, additional reporting by Bozorgmehr Sharafedin in London, Stephanie Kelly in New York; Editing by Diane Craft, Kirsten Donovan)
(Only the headline and image of this report may have been edited by Business Standard contributors; the rest of the content is auto-generated from a syndicated feed.)