Oil futures: Crude climbs higher as focus remains on Russian supplies

13 May 2022

Quantum Commodity Intelligence - Brent crude oil futures Friday were trading higher as tighter controls on Russian oil buying were set to kick in, although wranglings over details threatened to derail the end-of-year timeline on the wider oil embargo against Russia.

Front-month July ICE Brent futures were trading at $110.69/barrel (1500 GMT), compared to Thursday’s settle of $107.45/b.

At the same time, June NYMEX WTI was trading $109.68/b, versus Thursday’s settle of $106.13/b.

Both benchmarks were heading for modest weekly losses after a volatile few days, versus last Friday's respective settlements of $112.39/b and $109.77/b. 

In the case of Brent, the front month traded above $113/b at the start of the week, dipping at one point on Wednesday to just above $101/b.

Global commodities giants are set to stop all crude oil purchases from Russia's state oil company Rosneft by 15 May as financial sanctions mean traders will no longer be able to buy oil from the firm unless "strictly necessary".

Sentiment has been dominated by sanctions talks this week as the EU looks to appease laggards, led by Hungary, while Slovakia, the Czech Republic and Bulgaria have also pushed back on timelines.

Greece led the protests against maritime sanctions, leading to a revision on the shipping of Russian oil. 

Oil markets Friday shrugged off reports suggesting the EU may have to scale back plans as Hungary digs in, looking for an exemption on Russian pipeline oil, which may push back the timeline completely.  

“There are reports that some EU members believe that a delay in the ban on Russian oil should be considered so that the rest of the sanction package can move forward. Hungary continues to block the proposed oil ban," said Warren Patterson, head of ING's commodity research.

Shortfalls in Russian gas supplies this week also underpinned the broader energy market, although European TTF gas prices were in retreat Friday after gains earlier in the week.

Thursday’s IEA and OPEC reports sent mixed messages to oil investors, flagging slowing demand growth. While Russian exports will continue to decline, the IEA rowed back on its ‘supply shock’ warning saying the world can cope despite tightening sanctions against Russian oil.