Oil prices jumped on Wednesday, as a large increase in U.S. crude inventories failed to soothe worries about tight global supply, with major oil traders expected to shun Russian barrels.
Brent crude settled up $4.14, or 4%, to $108.78. U.S. West Texas Intermediate (WTI) crude futures ended up $3.65, or 3.7%, to $104.25.
The gains came a day after both benchmarks climbed more than 6%. The oil market has swung wildly as end-users and traders have tried to quantify the disruption in Russia’s daily exports following its invasion of Ukraine. Most estimates range from 1 million to 3 million barrels per day.
“At the end of the day the market is running on some of these headlines out of Russia, which is becoming more threatening, and that continues to be more of a risk,” said Phil Flynn, analyst at Price Futures Group. “There’s still a debate of what impact this is going to have.”
On Tuesday, U.S. President Joe Biden accused Russia of genocide, and the United States, France and Germany all pledged to send more weapons. Biden listed artillery systems, armoured personnel carriers and helicopters.
Major global trading houses plan to reduce crude and fuel purchases from Russia’s state-controlled oil companies as early as May 15, sources said, to avoid falling foul of European Union sanctions on Russia, the world’s second largest crude exporter.
Russian President Vladimir Putin said Moscow can easily redirect exports of its vast energy resources away from the West. Some countries, including India, have kept buying Russian oil at steep discounts.
On Tuesday, the International Energy Agency (IEA) lowered expectations for worldwide demand and said rising global production could offset Russian oil output losses. The IEA said it expects Russian output to drop 1.5 million bpd in April, growing to close to 3 million bpd from May.
The White House is releasing 180 million barrels from U.S. reserves over six months, part of a release of 240 million barrels from members of the International Energy Agency.
U.S. production is expected to keep rising from 11.8 million bpd now to about 12 million in 2022. Exports of refined products reached an all-time record, as heavy overseas demand caused U.S. stockpiles to fall.
The Organization of the Petroleum Exporting Countries (OPEC), has said it would be impossible to replace expected supply losses from Russia and it would not pump more crude.
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