Oil up over supply woes amid expected Russian reaction to EU sanctions

By Sibel Morrow

ANKARA (AA) - Oil prices rose on Friday over bearish supply sentiment as investors are monitoring possible output cuts from Russia in response to a price cap from Western countries.

International benchmark Brent crude traded at $84.09 per barrel at 10.22 a.m. local time (0722GMT), up 0.75% from the closing price of $83.46 a barrel in the previous trading session.

American benchmark West Texas Intermediate (WTI) traded at $78.95 per barrel at the same time, a 0.70% gain after the previous session closed at $78.40 a barrel.

Fanning the price upticks, Russian President Vladimir Putin on Tuesday signed a decree prohibiting supplies of oil and petroleum products to countries which imposed a price cap on Russian fuel.

The decree, published on the governmental portal, comes into effect on Feb. 1 and will be valid until July 1, 2023.

The ban is applicable to contracts which "expressly or indirectly" contain either the term "price cap" or a mechanism for setting a price limit at any stage of supply from the producer to the end buyer.

Rising concerns over the number of COVID-19 cases in China amid the country’s steps to ease the mitigation measures are limiting further price increases.

China recently announced it would begin to ease pandemic measures, the biggest economy to opt to "live with COVID" following three years of lockdowns, closed borders, and mandatory quarantines.

Following this decision, as the number of the cases is on the rise in China, several countries imposed restrictions on people traveling from China.

Italy became the first Western country Wednesday to make COVID-19 tests mandatory for air passengers from China.

The US, Japan, and Italy announced they will enforce new COVID-19 requirements for passengers from China, including negative tests.

The UK is considering imposing restrictions on passengers from China, its defense chief said Thursday.

Health authorities in EU countries discussed the issue and decided they would continue negotiations to reach a common stance on travel rules.

Meanwhile, an unexpected jump in crude oil inventories in the US is also limiting price gains. According to Energy Information Administration data, US commercial crude oil inventories rose by 700,000 barrels to 419 million barrels, against the market expectation of a fall of around 1.3 million barrels.