Oil prices up with market inundated with supply, demand uncertainties

ANKARA

Oil prices increased on Tuesday over supply side concerns while pandemic restrictions in China, the world’s largest oil-consuming country, continue to raise demand concerns and weigh on prices.

International benchmark Brent crude traded at $94.91 per barrel at 10.20 a.m. local time (0720 GMT) for a 0.96% increase from the closing price of $94 a barrel in the previous trading session.

American benchmark West Texas Intermediate (WTI) traded at $88.69 per barrel at the same time for a 1.03% gain after the previous session closed at $87.78 a barrel.

According to data released by the US Department of Energy (DOE) on Monday, emergency crude oil stocks in the country dropped by 8.4 million barrels last week to reach 434.1 million barrels, its lowest level since October 1984.

This drawdown was the highest from the Strategic Petroleum Reserve (SPR) since May, with the batch including roughly 6.3 million barrels of sweet petroleum and about 2 million barrels of sour crude.

The stock withdrawal was in line with US President Joe Biden’s pledge in March to release 1 million barrels per day over six months from the SPR to fight high fuel prices in the country.

Market players are focused on how the current price caps on Russian oil exports and EU sanctions will alter the supply outlook.

EU leaders decided in early July to cut Russian oil imports by 90% by the end of the year in accordance with the sixth set of sanctions.

The strategy calls for phasing out Russian crude oil shipments by Dec. 5 and refined product deliveries by Feb. 5.

The EU's recent decision to cap Russia's crude oil export prices came after the bloc's proposal to largely ban Russian oil. However, in retaliation, Russia shut down the vital Nord Stream pipeline that transports gas to Europe "due to a technical issue."

Further blurring the supply outlook, European powers on Saturday expressed "serious doubts" over Iran's intentions in negotiating a nuclear agreement and cautioned that Tehran's stance could jeopardize efforts to revive the 2015 pact.

The much-expected deal will allow Iran to enjoy sanctions relief and to sell its oil worldwide in return for tough restrictions on its nuclear program.

Meanwhile, fuel demand in China is expected to decline after the country boosted COVID-19 restrictions, which affect over 65 million people in more than 30 cities, including many in Chengdu, a city of 21 million citizens in the country’s southwest, where an indefinite lockdown was imposed at the start of the month.