Oil heads for strong weekly gain on supply risks

Oil prices edged higher on Friday and were set to post weekly gains of more than 4%, supported by escalating supply risks from the Russia-Ukraine conflict.

Brent crude futures rose 21 cents, or 0.3%, to $69.63 a barrel by 0635 GMT, while U.S. West Texas Intermediate (WTI) gained 32 cents, or 0.5%, to $65.30. Both benchmarks are tracking their largest weekly advance since mid-June, when Brent and WTI surged over 11% and 13%, respectively, during Israel–Iran tensions.

IG analyst Tony Sycamore said prices were buoyed by “ongoing Ukrainian drone strikes on Russian oil infrastructure, NATO’s warning to Moscow over airspace violations, and Russia’s move to halt key fuel exports.”

Russia confirmed a partial ban on diesel exports through year-end, while extending its gasoline export ban, Deputy Prime Minister Alexander Novak said Thursday. The measures, combined with refinery outages from drone attacks, have pushed Moscow close to cutting crude output, with several regions already experiencing fuel shortages.

Geopolitical tensions also intensified after NATO warned of a response to further Russian airspace violations, heightening risks of additional sanctions on Russia’s oil sector, ANZ analyst Daniel Hynes noted.

Oil prices this week also drew support from a surprise drop in U.S. crude inventories. Both Brent and WTI touched their highest levels since August 1.

Capping some of the rally, revised U.S. GDP data showed the economy grew at a stronger-than-expected 3.8% annualized pace last quarter, raising the risk that the Federal Reserve could move more cautiously on future interest-rate cuts after last week’s 25-basis-point reduction.