Energy futures rose Tuesday, holding on to gains as Russia banned the sale of oil and oil products to countries that participate in a price cap on the country’s crude exports.
Crude had already found support on optimism about Chinese demand as the country said it would drop quarantine requirements for incoming travelers, and after a brutal U.S. winter storm forced the temporary closure of several Texas refineries.
West Texas Intermediate crude for February delivery
rose $1.09, or 1.4%, to $80.65 a barrel on the New York Mercantile Exchange.
February Brent crude
the global benchmark, was up $1.29, or 1.5%, at $85.21 a barrel on ICE Futures Europe. March Brent
the most actively traded contract, gained $1.10, or 1.3%, to trade at $85.60 a barrel.
was up 0.1% at $2.385 a gallon, while January heating oil
rose 3.3% to $3.376 a gallon.
January natural gas
rose 1.2% to $5.138 per million British thermal units.
Russian President Vladimir Putin announced a ban on the sale of oil which would allow exports to countries imposing a price cap only in the case of a special exemption from the Kremlin.
See: Kremlin bans sale of Russian oil to countries that impose price cap
The long awaited move comes after the U.K. and European Union earlier this month banned imports of seaborne crude from Russia and as the EU and Group of Seven imposed a ceiling on Russian crude prices by barring companies from insuring, financing or shipping oil priced above $60 a barrel. Urals crude, Russia’s benchmark, trades at a steep discount to Brent crude, the global benchmark.
Crude oil prices were previously finding support to begin a holiday-shortened week after China on Monday took a step toward fully reopening the country to travel. U.S. and U.K. markets were closed Monday for Christmas holidays.
The National Health Commission said China would drop a quarantine requirement for passengers arriving from abroad effective Jan. 8. Arriving passengers currently must quarantine for five days at a hotel and then three days at home. Previously, incoming travelers had been required to quarantine as many as three weeks.
Broader loosening of China’s once stringent COVID-19 curbs has provided support for crude, which has bounced off nearly one-year lows set earlier this month. China’s COVID restrictions have been seen curtailing crude demand in 2022.
“Throughout 2022, China’s lockdown measures had often created acute, near-term demand declines, with the recent pivot causing some to increase their demand expectations for 2023,” said Robbie Fraser, manager of global research and analytics at Schneider Electric, in a note.
“Still, recession risk and rising interest rates remain a top concern for crude futures, and the potential for headwinds continues to challenge any attempt by prices to move higher,” he wrote.
Winter weather knocked out 1.5 million barrels a day of production at refineries on the U.S. Gulf Coast Friday, Reuters reported, though the outages were expected to be short-lived.