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Oil Mixed on Week: Brent Falls Slightly, U.S. Crude up Amid Record Pump Prices

Commodities May 13, 2022 04:08PM ET
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© Reuters.

By Barani Krishnan

Investing.com -- Crude prices were mixed on the week as Friday's trading oil closed, with global benchmark Brent showing a slight weekly loss amid a continued holdout by Europe on a Russian oil ban, while U.S. crude rose on strong summer demand bets and supply tightness that have pushed pump prices to record highs.

Both Brent and U.S. crude’s West Texas Intermediate benchmark rose about 4% in Friday’s trade, extending their recovery from a near 10% loss in the first two days of the week sparked by fears that America might be tipped into recession from aggressive rate hikes by the Federal Reserve trying to beat the worst inflation in 40 years.

London-traded Brent settled at $111.55 a barrel, up $4.10, or 3.8%, on the day. For the week, it was down 0.7%.

New York-traded WTI settled at $110.49, up $4.36, or 4.1%. For the week, it rose 0.7%.

The divergence between Brent and WTI is "a story of two oils,” said John Kilduff, partner at New York energy hedge fund Again Capital.

“The holdout on an European embargo of Russian oil, particularly by Hungary, is limiting Brent’s upside, while WTI is basking in bullish glory from the refining crunch in fuels that’s sent U.S. pump prices to record highs,” Kilduff said.

Some European Union nations said on Friday that the push to ban Russian oil should probably be delayed to prioritize other sanctions against Moscow, particularly if the bloc could not win immediate consensus from Budapest for an embargo.

Saudi Arabia’s Energy Minister Abdulaziz bin Salman, meanwhile, tried to avert any blame on OPEC+ for the record high pump prices in the United States, saying it was a lack of U.S. refining capacity that was responsible for the crisis rather than supply from the global oil exporters alliance.

OPEC+ has managed to push crude prices up from their lows whenever it meets each month, by offering a meager production hikes at well below the market’s needs.

“The bottleneck [in U.S. fuel supply] now [has] to do with refining,” Abdulaziz told Bloomberg in an interview on Friday. “I did warn this was coming back in October. Many refineries in the world, especially in Europe and the US, have closed over the last few years. The world is running out of energy capacity at all levels.”

Record-high fuel prices are testing the mettle of U.S. consumers, with gasoline at above $4.50 per gallon at some US pumps while diesel retails at above $6.

The International Energy Agency cautioned on Thursday that soaring pump prices and slowing economic growth are expected to significantly curb the demand recovery through the remainder of the year and into 2023. 

Economists, meanwhile, warn that the US economy, finally on the path to resilience after the damage wrought by the two-year-long coronavirus pandemic, could head for recession again from a one-two punch delivered by record-high fuel prices and Fed rate hikes.

Oil Mixed on Week: Brent Falls Slightly, U.S. Crude up Amid Record Pump Prices
 

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Comments (4)
Taregh Abedzadeh
Taregh Abedzadeh May 13, 2022 3:26PM ET
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What about Chinas covid situation and how Beijing might go to lockdown soon? Wouldn’t that bring oil down?
Barani Krishnan
Barani Krishnan May 13, 2022 3:26PM ET
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That should be closely watched, yes. The China Covid situation is still very fluid. The longer it drags, the longer the weight on oil.
Unmesh Suryavanshi
Unmesh Suryavanshi May 13, 2022 2:41PM ET
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So will WTI trade above 110 in the foreseeable future?
Unmesh Suryavanshi
Unmesh Suryavanshi May 13, 2022 2:40PM ET
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So will WTI trade above 110 in the foreseeable future?
Unmesh Suryavanshi
Unmesh Suryavanshi May 13, 2022 2:40PM ET
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So will WTI trade above 110 in the foreseeable future?
Barani Krishnan
Barani Krishnan May 13, 2022 2:40PM ET
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The $110 resistance is just barely broken. I'd think a clear break above $115 is needed to recapture $120 highs.
Unmesh Suryavanshi
Unmesh Suryavanshi May 13, 2022 2:40PM ET
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So is it indecisive as long as it's below $115?
Barani Krishnan
Barani Krishnan May 13, 2022 2:40PM ET
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Unmesh Suryavanshi I would this so, yes.
Barani Krishnan
Barani Krishnan May 13, 2022 2:40PM ET
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Unmesh Suryavanshi I meant I would "think " so
Unmesh Suryavanshi
Unmesh Suryavanshi May 13, 2022 2:40PM ET
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It's really poised for a major movement in my opinion with my very limited experience. Upcoming contract will be interesting, irrespective of direction.
 
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