OIL: Oil Rallies On Tough EU Comments, US Stock Build May Pressure Prices

Trading in recent months has been characterised by concerns over excess supply pushing prices lower and an expansion of sanctions on Russia driving them higher. Prices rose on Tuesday following comments from EU foreign minister Kallas that increased expectations of stricter restrictions on Russia. The announcement of new US/EU sanctions in October pressured Russia’s Urals benchmark and it is down further this week. Reports of another US oil inventory build may pressure prices on Wednesday.

• Kallas said that Russia’s actions against the EU constitute “state-sponsored terrorism” prompting expectations of further sanctions. There have been numerous incursions of airspace over recent weeks.
• WTI rose 1.3% to $60.69/bbl after a high of $60.93. It had traded below $60 through Tuesday’s APAC and early European sessions before breaking above. Initial resistance is at $62.59 with the bear trigger at $55.96.
• Brent is up 0.9% to $64.78/bbl off the intraday peak of $65.10, holding below resistance at $65.95. The bear trigger is at $59.97.
• Ukrainian attacks on Russian refineries and sanctions on Russian majors Rosneft and Lukoil, which are due to be imposed on Friday, have increased concerns over diesel supplies driving prices higher. ICE gasoil prices rose 6.4% yesterday. The restrictions already appear to be having an effect with some Asian purchases out on hold and ICE reporting that physical diesel deliveries will have to be from non-Russian crude.
• Bloomberg reported that there was a US crude inventory build of 4.4mn barrels last week after an increase the week before, according to those familiar with the API data. Product stocks were higher too with gasoline +1.5mn and distillate +600k. The official EIA data is out on Wednesday.