Oil rises on supply concerns, trimming big weekly drop

Oil prices rose above $110 a barrel on Friday but were headed for their biggest weekly decline since November as traders factored in the potential for further bans on Russian crude and an increased supply from other producers.

Brent crude rose 2.7 percent to $112.23 at 12:10 p.m. Riyadh time but was set for a weekly decline of 5.2 percent after reaching a 14-year high of $139.13 on Monday. 

US benchmark WTI was 2 percent higher at $108.09, on track for a 6.6 percent weekly drop after touching $130.50 on Monday.

Prices spiked earlier in the week as the US and the UK both announced embargoes on Russian crude but eased off later in the week as the EU made it clear it was not going to follow their lead.

“Both contracts could well move sharply below $100 a barrel from here on any news perceived as easing supply disruptions,” said Jeffrey Halley, an analyst at OANDA.

Similarly, both contracts could easily rise to over $115 on any negative headlines, he said.

The EU will not impose sanctions on Russian gas or oil, Hungarian Prime Minister Viktor Orban said in a video posted on his Facebook page on Friday, amid a summit of the bloc’s leaders in France.

“The most important issue for us has been settled in a favorable way: there won’t be sanctions that would apply to gas or oil, so Hungary’s energy supply is secure in the upcoming period,” Orban said.

Europe is heavily reliant on Russian energy supplies and imports about 3 million barrels per day of crude from its neighbor to the east.

In the near term, supply gaps are unlikely to be filled by extra output from members of the Organization of the Petroleum Exporting Countries and allies, together called OPEC+, given that Russia is part of the grouping, Commonwealth Bank analyst Vivek Dhar said.

Some OPEC+ producers, including Angola and Nigeria, have failed to meet their production targets in recent months, suggesting the group would struggle to offset Russian supply losses.

However, UAE on Thursday became the first OPEC member to call on the alliance to increase oil production, citing the need for stability in energy markets for the sake of the global economy.