Oil futures: Brent rebounds over 4.5% on Russian oil ban talks, gas shortfall
Quantum Commodity Intelligence - Crude oil futures Wednesday staged a strong rebound as the EU continues with its bid to phase out Russian oil by year-end, while the disruption to Russian gas flows via Ukraine also underpinned sentiment.
Front-month July ICE Brent futures were trading at $107.21/b (1745 GMT), compared to Tuesday’s settle of $102.46/b, having traded at a low of $101.30/b on Wednesday.
At the same time, June NYMEX WTI was trading $105.25/b, versus Tuesday’s settle of $99.76/b.
The EU's proposed Russian oil embargo was said to be making progress, but Hungary was seen as the main obstacle as Prime Minister Viktor Orban sought further financial inducements and time to smooth the transition away from Russian energy.
Orban was reportedly looking for EU funds to help revamp Hungarian refineries, which are mostly configured towards Urals crude, while also pushing for help with oil storage and other infrastructure.
Markets found support, however, as OPEC+ production surveys revealed the group is falling further behind on quotas, while senior OPEC ministers sent a reminder of the broader energy crunch and lack of investment.
Traders were also watching for developments in gas flows to Europe following Tuesday's disruptions via Ukraine.
Markets found further support late in the session on reports that Russia was introducing counter-sanctions, including against its former German subsidiary that was nationalised last month.
In addition, firmer equities prices Wednesday calmed nerves over recessionary concerns, at least for now, while the rate of new Covid cases in China was also declining.
"If China does reopen, supplies are going to look a lot tighter very quickly," said Phil Flynn of The Price Futures Group.
"I believe Tuesday’s sell off was a much-needed correction with prices getting closer to fair value and we took out some of the speculative fluff," added Flynn.
Oil markets largely shrugged off data from the Energy Information Administration, which showed an 8.5 million/b build in crude stocks last week, as falls in distillates and gasoline helped offset the crude build.
On Tuesday, the American Petroleum Institute reported a build in US crude stocks last week of 1.618 million barrels, compared to analysts' predictions for a small draw. Gasoline inventories increased by 823,000 barrels, while distillate stocks saw a build of 662,000 barrels for the week ending May 6.
Separately, the EIA expects crude oil output to rise 720,000 bpd to 11.91 million bpd in 2022, the agency said in its monthly forecast, while oil consumption is due to rise by 730,000 bpd to 20.51 million bpd in 2022.
The output forecast is down from the 12 million bpd expected a month earlier while it also cuts its 2023 outlook from 13 million bpd to 12.8 million bpd.
In economic news, the US consumer price index accelerated 8.3% in April, more than the 8.1% estimate and near the highest level in more than 40 years. Core CPI, which excludes food and energy, also was higher than expected, rising to 6.2%.