Crude oil prices rebounded on Friday as traders stayed away from Russian crude on concern shipments will be disrupted by Western sanctions.
Crude’s rally was halted on Thursday as the resumption of talks on Iran’s nuclear deal raised the prospect of new supply hitting global markets.
Brent crude gained as high as $114.23 a barrel before trading little changed at $110.51 at midday in Riyadh. US benchmark WTI gained 0.5 percent to $108.17.
Both grades are headed for their biggest weekly advance since mid-2020. Brent is 12 percent higher and WTI 18 percent after hitting 10-year highs earlier in the week.
Prices spiked earlier in the session after reports of a fire at Ukraine’s Zaporizhzhia nuclear plant amid Russian bombing. However, Russia has since gained control of the facility and the fire has been extinguished.
While Western sanctions have yet to target Russian energy exports, traders are loath to purchase shipments as US President Joe Biden comes under increasing pressure to ban Russian crude imports.
“The escalation of Russia's war in Ukraine has not only caused geopolitical risks, but is adding to already elevated inflationary concerns as well as driving increased risk premiums,” RBC Capital analyst Christopher Louney wrote in a research note.
More oil supplies could be added from a coordinated release of 60 million barrels of oil reserves by developed nations. Japan said on Friday it plans to release 7.5 million barrels of oil, though that is a small fraction of its demand.
Brent crude will average $110 a barrel in the second and third quarters of this year but there is a risk that prices could rise as high as $150 a barrel, Commonwealth Bank of Australia analyst Vivek Dhar said in a note.
IEA Executive Director Fatih Birol said on Thursday that the decision this week by Organization of the Petroleum Exporting Countries and its allies, known as OPEC+ to stick with its plan to gradually increase output in the coming months was “disappointing.”
However, “we have more than enough stocks to take further action if warranted” he said, according to Reuters.
