Oil rises more than 5%, as energy row between Russia and the European Union intensifies

Workers walk as oil pumps appear in the background at the Ouzin oil and gas field in Kazakhstan’s Mangistau region, November 13, 2021. REUTERS/Pavel Mikheev

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  • Crude Oil Rises After Falling Nearly 10% Over Two Days
  • Hungary seeks EU embargo on Russian oil
  • Ukraine halts some flows of Russian gas
  • Big build in US crude stocks, drop in gasoline

NEW YORK (Reuters) – Oil prices rose more than 5% on Wednesday after Russian gas flows to Europe declined and Russia imposed sanctions on some European gas companies, adding to uncertainty in global energy markets.

Oil and gas prices have risen since Moscow invaded Ukraine in February and the United States and its allies subsequently imposed heavy sanctions on Russia. Crude trade was curtailed, and Russia threatened to cut gas supplies to Europe, although it did not reach this step.

Russian gas flows to Europe via Ukraine fell by a quarter after Kyiv halted use of a major transit route, blaming the intervention of occupying Russian forces. This was the first time that exports through Ukraine had been disrupted since the invasion. Read more

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The move raised fears of similar outages even with prices already rising. Russia on Wednesday imposed sanctions on 31 companies based in countries that imposed sanctions on Moscow after Russia’s invasion of Ukraine in February. Read more

Brent crude closed up $5.05, or 4.9 percent, to $107.51 a barrel, while US West Texas Intermediate crude rose $5.95 a barrel to $105.71, an increase of 6 percent.

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The European Union has threatened to impose a complete embargo on Russian oil, although negotiations continue. Because of Russia’s role as the largest exporter of crude and fuel, the unrest – which is expected to worsen – has tightened markets around the world, especially for refined products such as diesel.

“Prices will continue to rise especially if the European Union reaches an agreement to phase out Russian oil purchases over the course of the current year,” said Andrew Lipow, president of Lipow Oil Associates in Houston.

The European Union is still haggling over a Russian oil embargo, which analysts say will tighten the market and alter trade flows. The vote needed unanimous support, but was postponed because Hungary backed down in its wake in opposition. Read more

The latest US inventories figures highlight the dynamics driving prices higher. Although US crude stocks grew by more than 8 million barrels – largely due to another release of strategic reserves – gasoline stocks fell by 3.6 million barrels and distillate stocks also fell.

Refining capacity dwindled in the United States and the nation increased exports to meet demand from overseas buyers. So far in 2022, the US exports, on net, nearly 4 million barrels of fuel per day.

“The 90% utilization figures are not what they used to be because overall capacity is down,” said Tony Hedrick, energy market analyst at CHS Hedging. “We see refineries not being able to keep up with the demand for gasoline.”

The price of crude oil soared in 2022 as Russia’s invasion of Ukraine heightened supply concerns, with Brent crude hitting $139, the highest since 2008, in March. Concerns about growth stemming from China’s coronavirus restrictions and US interest rate hikes caused a recession this week.

Additional reporting by Alex Lawler in London and Laura Sanicola and Arathi Sumasekhar in New York. Editing by Jason Neely, Louise Heavens, Tomasz Janofsky and David Gregorio

Our criteria: Thomson Reuters Trust Principles.

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