Oil prices fall as supply shortages decrease and trade costs rise
Oil prices fell on Friday as supply concerns eased as European Union countries were divided over imposing an oil embargo on Russia, while the United States and its allies considered releasing more oil from stockpiles to cold markets.
Brent crude futures fell 46 cents, or 0.4%, to $118.57 a barrel at 0529 GMT, after falling 2.1% in the previous session.
West Texas Intermediate (WTI) crude futures were down 47 cents, or 0.4%, to $111.87/bbl, after falling 2.3% in the previous session.
Both contracts are heading for their first weekly gains in three weeks, with Brent on track for a 10% bounce and WTI on track for a 7% increase amid broad fears of a potential EU boycott of Russian oil and supply squeezes.
OPEC sources said officials believed a possible oil ban from Russia, a partner of the European Union, would harm consumers, and the group raised their concerns to Brussels.
While the US and UK have targeted Russian oil, such an action poses a significant challenge for the EU, which is dependent on Russia for 40% of its gas.
Punitive measures are being implemented against Russia since Moscow invaded Ukraine last month, which it calls a "special operation".
With global oil stocks at their lowest level since 2014, analysts said the market remains vulnerable to any supply shocks.
The Caspian Pipeline Consortium (CPC) terminal on Russia's Black Sea coast was damaged by a major storm Wednesday, halting exports, further adding to supply concerns. Kazakhstan said on Thursday that it expects the CPC to resume deliveries of crude oil within a month, but may divert some of its oil to tankers and pipelines in the Caspian Sea to Russia's Samara region and China.
Reflecting the volatility of the market, the Intercontinental Exchange increased margins for May Brent futures by 19% on Friday, recording its third increase this year, making trading more expensive.
Futures margin rates rise when markets are volatile, forcing traders to increase the deposits they hold on the exchange for each contract to prove they can meet their obligations.
The U.S. said on Thursday they are discussing a more coordinated release of oil from the U.S. and its allies' stockpiles to help keep prices down.
On top of it, it is rumored that the United States will supply more US liquefied natural gas (LNG) to Europe this year.
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