Oil prices inch lower as EU's Russian oil ban stalls

SINGAPORE (Reuters) – Oil prices inched lower on Tuesday as Hungary resisted a European Union push for a ban on Russian oil imports, a move that would tighten global supply, with investors taking profits on a recent rally.

FILE PHOTO: Oil pump jacks are seen at the Vaca Muerta shale oil and gas deposit in the Patagonian province of Neuquen, Argentina, January 21, 2019. REUTERS/Agustin Marcarian

Brent crude futures fell 11 cents, or 0.1%, to $114.13 a barrel by 0602 GMT, and U.S. West Texas Intermediate (WTI) crude futures slid 22 cents, or 0.2%, to $113.98 a barrel. Both benchmarks gained more than 2% on Monday, following a 4% jump on Friday.

EU foreign ministers failed on Monday in their effort to pressure Budapest to lift its veto of a proposed oil embargo on Russia following the country’s invasion of Ukraine. An embargo would require approval from all EU nations.

On the supply side, U.S. producers are ramping up in order to replenish inventories that have dwindled in the wake of Russia’s war on Ukraine – which Moscow calls “a special military operation” – and recovery from the COVID-19 pandemic.

Oil output in the Permian Basin in Texas and New Mexico, the biggest U.S. shale oil producer, is due to rise 88,000 barrels per day (bpd) to a record 5.219 million bpd in June, the U.S. Energy Information Administration (EIA) said on Monday.

Still, overall sentiment on prices remained bullish amid optimism about demand recovery in China as it looks to ease COVID restrictions that have hurt its economy, analysts said.

“All supply data suggest dips will be shallow despite potential demand destruction from China’s lockdown but even in that view, we are seeing the light at the end of the lockdown tunnel trade,” said Stephen Innes, managing partner at SPI Asset Management, in a note.

Shanghai on Tuesday achieved the long-awaited milestone of three consecutive days with no new COVID-19 cases outside quarantine zones and set out on Monday its clearest timetable yet for exiting a lockdown now in its seventh week.

Further supporting prices was the “intensifying geopolitical tension” between EU and Russia as Sweden and Finland seek to join NATO, CMC Markets analyst Tina Teng said.

“This could cause a retaliation action by Russia to further cut gas supply,” she added.

Stockpiles in the Strategic Petroleum Reserve (SPR) fell to 538 million barrels, the lowest since 1987, data from the U.S. Department of Energy showed on Monday, underlining tight supply.

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