Oil jumps $1 due to Russian supply concerns; US hurricane effects expected

Oil prices gained more than $1 on Friday due to forecasts of a decline in Russian crude supply, helping to offset concerns about a knock to U.S. transport fuel demand growth as an Arctic storm threatens travel over the holiday season.

Brent crude was up 66 cents, or 0.8%, to $81.64 a barrel by 0440 GMT, while West Texas Intermediate (WTI) crude was up 78 cents, or 1%, to $78.27 per barrel.

Earlier in the session, they reached highs of $82.17 and $78.77, respectively. Brent was up 3.3% and WTI was up 5.4%, putting them on track for a second weekly gain.

According to traders and Reuters calculations, Russia's Baltic oil exports could decline by 20% in December compared to the previous month after the European Union and G7 nations implemented sanctions and a price ceiling on Russian petroleum beginning on December 5.

Russia may reduce oil output by 5%-7% in early 2023 in response to price ceilings on crude and oil products by banning sales to nations that support them, Deputy Prime Minister Alexander Novak said on Friday.

"Crude prices are higher as energy traders focus on Moscow's reaction to the price cap imposed on Russian oil, rather than the thousands of airline cancellations that will affect holiday travel," said OANDA analyst Edward Moya.

More than 4,400 flights in the United States were cancelled during a two-day period due to the winter storm, which coincided with a holiday travel season that some say would be the busiest ever.

Oil prices fell on both sides of the Atlantic on Thursday as flights were cancelled. The snowstorm may also disrupt motorists' intentions to travel throughout Christmas and New Year's, reducing petroleum use.

However, because the bad weather is predicted to create power disruptions, heating oil demand may increase.

"Cold temperatures are predicted to spread southward to Texas, Florida, and the eastern states as crude oil inventories decline and winter storms hit the United States. The demand for heating oil will skyrocket "CMC Markets analyst Leon Li stated.

The Energy Information Administration said that US oil inventories declined by 5.9 million barrels to 418.2 million barrels in the week ending Dec. 16, above expectations for a 1.7 million-barrel reduction. [EIA/S]

However, rising COVID-19 cases in the world's second-largest oil user China, concerns about more rate hikes globally, and a slump in fuel usage curtailed oil price gains.

"China remains the oil market's largest wildcard, and hope remains high that the reopening will continue and eventually lead to increased demand," OANDA's Moya said.