By Gina Lee
Investing.com – Oil was up on Thursday morning in Asia, extending a cautious rally as signs of a tight market emerge. The European Union (EU)’s clash with Hungary over plans to ban imports from Russia, the world's second-largest crude exporter, also continues.
Brent oil futures were up 0.31% to $111.47 by 11:51 PM ET (3:51 AM GMT) and WTI futures for July delivery rose 0.50% to $110.88.
Investors also digested Wednesday’s crude oil supply data from the U.S. Energy Information Administration (EIA). The data showed a draw of 1.019 million barrels in the week to May 20, 2022. Forecasts prepared by Investing.com predicted a draw of 737,00 million barrels, while a 3.394-million-barrel draw was recorded during the previous week.
Crude oil supply data from the American Petroleum Institute released the day before, showed a build of 567,000 barrels.
Some investors said the EIA draw and the prospect of an EU embargo on Russian oil, in retaliation for Russia’s invasion of Ukraine on Feb. 24, were pushing prices higher.
"The main upside driver is an EU ban on Russian oil imports," Commonwealth Bank Of Australia (CBA) commodities analyst Vivek Dhar told Reuters.
European Council President Charles Michel on Wednesday said he is confident that an agreement can be reached before the body's next meeting on May 30, 2022. However, member country Hungary could still block the implementation of this ban. Hungary is seeking about EUR750 million euros ($801.27 million) to upgrade its refineries and expand a pipeline from Croatia to switch away from Russian oil.
Even without a formal EU ban, less Russian oil is available to the market as buyers and trading houses avoid crude and fuel suppliers from the country. Cargo from Baltic ports is taking longer journeys to Asian refineries, while deliveries to the Netherlands and France have all but halted, according to ANZ analysts.
A forecast increase in oil output to a record high of 5.2 million barrels per day (bpd) in the Permian Basin of the United States is unlikely to plug the 2 million to 3 million bpd gap from lost Russian supply, said CBA's Dhar.
However, ongoing COVID-19 lockdowns in China, the world’s biggest oil importer, that could impact fuel demand, dampened sentiment.