Oil Stretches Gain as Market Tracks Russia Tensions, Supply Risk

(Bloomberg) -- Oil extended its biggest gain in more than a week, as US President Donald Trump ramped up his rhetoric against Russia and traders watched for supply disruptions from the OPEC+ member.

Brent traded above $68 a barrel after gaining 1.6% on Tuesday, while West Texas Intermediate rose above $64. Trump said he thought NATO nations should shoot down Russian aircraft that violated their airspace and struck a more sympathetic tone on Ukraine’s chances of winning the war. He also reiterated the need for Europe to cut its energy purchases from Moscow.

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In the US, an industry report showed crude inventories fell 3.8 million barrels last week, though holdings of distillates increased. Official data are due later on Wednesday.

Meanwhile, Russia mulled restrictions on diesel exports for some companies following a spate of attacks by Ukrainian drones on its energy infrastructure, including pipeline facilities, that have put the nation’s supply in focus. Gasoil, a category that includes diesel, settled 2.4% higher in Europe on Tuesday, its biggest gain in three weeks.

“Oil prices remain supported as inventories in the OECD stay low, and it looks like the US will have another large crude draw,” according to Giovanni Staunovo, an analyst with UBS Group AG. Still, he added, higher OPEC+ crude exports so far in September remain a headwind.

Oil is little changed this month as traders weigh a bearish fundamental outlook against long-running geopolitical tensions. On the supply front, Iraq is finalizing a deal to restart crude exports from its Kurdistan region following a two-year halt. That could bring about 230,000 barrels a day back to the international market, exacerbating a looming glut.

Some market metrics point to strengthening, with Brent’s prompt spread — the difference between its two closest contracts — at 77 cents a barrel in backwardation, more than double the level two weeks ago. Meanwhile, the difference between the two closest December contracts widened to $1.68 a barrel from less than $1 a fortnight ago.

--With assistance from Sarah Chen, Charlie Zhu and John Deane.

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