Oil rises on the second day among the concerns over supply tightness
Oil prices rose for a second day on Tuesday amid concerns about tightening European supplies after Gazprom, a major oil and gas supplier to the region, cut off Russian gas supplies through a major pipeline.
Brent crude futures for the September settlement rose $1.51, or 1.4%, to $106.66 a barrel as of 0339 GMT, increasing the previous day's gain of 1.9%.
West Texas Intermediate (WTI) crude futures for September delivery were up $1.36, or 1.4%, to $98.04 a barrel, after gaining 2.1% on Monday.
Europe's supply of crude oil, oil product, and gas has been disrupted by Western sanctions and payment disputes with Russia.
Russia announced on Monday the gas squeeze in Europe as Gazprom said that the supply from the Nord Stream 1 pipeline to Germany will fall to 20% of capacity.
Russia's supply disruption will make countries unable to meet their targets to refill their gas tanks before the winter demand period. Germany, Europe's largest economy, is facing potentially restricted gas supply to industry to keep its citizens warm during the winter months.
This may lead end users to change their gas preferences to use other petroleum products, especially diesel. However, it poses risks as most of the diesel fuel in the region is supplied from Russia, leading to support for oil prices.
Declining demand due to high crude oil and fuel prices and the expectation of an increase in interest rates in the USA put pressure on prices. The tensions created by the supply risk concerns due to the Russia-Ukraine conflict will probably continue for a while.
The US central bank is expected to raise interest rates by 75 basis points by the end of Wednesday's policy meeting. This increase may reduce economic activity and thus affect fuel demand growth.
Market sentiment oscillates between concerns about supply-side instability and expectations for weaker fuel demand under downward pressure from the global economy.
The gap between European international benchmark Brent and USA's WTI widened to levels not seen since June 2019 as US gasoline demand eased, putting pressure on US crude and limited supply supported Brent.
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