Oil prices surged on Friday, driven by the possibility of a decline in Russian crude supply, which offset concerns over downward pressure on US transport fuel demand growth as a winter storm is expected to disrupt travel during the holiday season.
February contract Brent crude futures added 2.4% to $82.96 per barrel, having peaked at $82.17 earlier, while same-month contract US West Texas Intermediate (WTI) crude futures climbed 1.9% to $78.96 per barrel after reaching a high of $78.77 earlier in the session.
Both benchmarks were on course for a second weekly gain, with Brent rising 3.3% and WTI gaining 5.5%.
Traders Focus on a Possible Drop in Russian Crude Supply
Providing support to prices was the potential of Russia’s Baltic oil exports dropping by 20% this December from last month, following the European Union (EU) and Group of Seven (G7) countries’ move to ban and place a price limit on Russian crude from December 5.
A news agency citing a statement from Deputy Prime Minister Alexander Novak, Novak said Russia might reduce production by 5% to 7% early next year as it copes with price curbs by pausing sales to the countries that support them.
Analyst Edward Moya stated that oil prices are increasing as energy traders shifted their attention to Moscow’s response to the price cap on Russian oil from the flight cancellations that will dent holiday travel.
A looming snowstorm in the US, which will occur at the same time as a holiday travel season that some expect to be the busiest ever, has resulted in over 4,400 US flights being called off in the span of two days.
The canceled flights weakened oil prices on Thursday. The winter storm may also disrupt motorists’ Christmas and New Year travel plans, limiting gasoline consumption.
On the other hand, demand for heating oil could strengthen as the extreme weather is seen cutting off power.
