Oil settles on distillate strength, supply concerns

Storage tanks at the Los Angeles Marathon Petroleum Refinery, which processes domestic and imported California Air Resources Board (CARB) crude oil, gasoline, diesel fuel, and other petroleum products, are seen in Carson, California, US, March 11, 2022. Photo taken. By a drone. Reuters / Bing Guan / Files

NEW YORK (Reuters) – Oil prices reversed course to settle in positive territory on Monday amid a recovery in the diesel market and fears that supplies could be affected by a possible European Union ban on Russian crude.

Brent crude futures rose 44 cents, or 0.4%, to settle at $107.58 a barrel, while US West Texas Intermediate crude futures rose 48 cents to settle at $105.17 a barrel.

Diesel futures extended their rally after moving into the June contract on Monday, surging 5% to $4.0172 a gallon, as a global downpour in inventories put pressure on WTI and Brent crude prices.

“The key element was an additional boost in the diesel market that lifted the rest of the complex higher,” said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.

Both benchmarks fell more than $2.00 earlier in the session on news that the European Commission could spare Hungary and Slovakia from a Russian oil embargo as it prepares to finalize the next set of sanctions on Russia on Tuesday. Read more

The European Union is leaning toward a ban on Russian oil imports by the end of the year, two EU diplomats said, after talks between the European Commission and EU member states at the weekend. Read more

Hungary will not vote in favor of any measures prepared by the European Union that would jeopardize the security of its oil or gas supplies, Hungarian Foreign Minister Peter Szyjjarto said, repeating the country’s position on Monday to RTL TV. Read more

About half of Russia’s 4.7 million barrels per day of crude oil exports go to the European Union, supplying about a quarter of the bloc’s oil imports in 2020. Read more

On the demand side, US factory activity grew at its slowest pace in nearly two years in April, according to a survey by the Institute for Supply Management (ISM) on Monday. The ISM’s indicator of national factory activity fell to a reading of 55.4 last month, which is still considered a sign of expansion.

“US economic data continues to point to an expansion in the manufacturing sector, far from a recession figure,” said Phil Flynn, market analyst at Price Futures Group in Chicago.

Markets in Japan, Britain, India and across Southeast Asia were closed for public holidays on Monday.

China released data on Saturday showing that factory activity in the world’s second largest economy contracted for the second month in a row to its lowest level since February 2020 due to the shutdowns linked to the COVID-19 epidemic. Read more

“Slowing down to this extent, when China is already suffering from property collapse and concerns about increased regulation (until recently), is likely to be a major problem for commodity markets and the global economy,” Tobin Gurry, a commodities analyst at the Commonwealth Bank, said in a note. .

(This story corrects the Brent crude settlement price in paragraph 2).

(Laura Sanicola reporting) Additional reporting by Noah Browning and Sonali Paul. Editing by Bernadette Bohm, Mark Potter, Emilia Sithole Mataris, Will Dunham, Paul Simao

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