Oil prices extend rally as peace talks make slim progress

London — Oil prices extended their gains on Friday at the end of a third volatile week of trade after slim progress in peace talks between Russia and Ukraine raised the spectre prolonged disruption to oil supply.

Brent crude futures rose $1.14, or 1%, to $107.78 a barrel at 10.03am GMT, after surging nearly 9% on Thursday in the largest percentage gain since mid-2020.

US West Texas Intermediate crude futures climbed $1.24, or 1.2%, to $104.22 a barrel, adding to an 8% jump on Thursday.

Both benchmark contracts were set to end the week down more than 4%, after having traded in a $16 range. Prices have dropped from 14-year highs hit nearly two weeks ago.

The supply crunch from traders avoiding Russian barrels, stuttering nuclear talks with Iran, dwindling oil stockpiles and worries about a surge of Covid-19 cases in China hitting demand have combined to produce a rollercoaster ride for crude this week.

The volatility has scared players out of the oil market, which in turn is likely to worsen price swings.

Despite battleground setbacks and punitive sanctions by the West, Russian President Vladimir Putin has shown little sign of relenting. The Kremlin said an agreement had yet to be reached after a fourth day of talks with Ukraine.

“President Putin appears unwilling to end hostilities. This should ensure that the energy complex remains well supported with plenty of scope for further volatility,” PVM oil market analyst Stephen Brennock said.

He also said rising US interest rates pointed to a stronger economy, which could underpin oil demand.

RBC Capital analyst Helima Croft cautioned that Russian oil export losses will likely prove enduring and that offsetting barrels are in short supply.

Underscoring tight supplies, consultancy FGE said on-land product stocks at key countries are 39.9 million barrels lower for this time of the year relative to the 2017-2019 average.

Reuters