NEW YORK (Reuters) – Oil prices climbed on Wednesday, supported by tight supplies, forecasts of a drawdown in U.S. crude inventories, and a weaker dollar. U.S. crude gained $1.62, or 2.4 percent, to $68.35.
Brent rose $1.98, or 2.6 percent, to $77.37 a barrel by 11:52 a.m. EDT.
Oil has been pressured by reports that the Organization of the Petroleum Exporting Countries (OPEC) and Russia may ease up on output cuts that have been in place since January 2017. The supply reductions have driven down global inventories and boosted prices, with global benchmark Brent crude reaching a 3-1/2-year high of $80.50 a barrel on May 17.
Brent has dropped more than $4 a barrel since then. On May 25, sources told Reuters that Saudi Arabia and Russia are discussing raising OPEC and non-OPEC oil output by around 1 million bpd.
On Wednesday, however, the Russian central bank issued a statement that a decline in oil prices would pose a risk to the country’s financial sector.
“It seems that somebody in the central bank is taking notice of the big drop in oil prices and sending a signal of, ‘Hey, wait a second. We don’t want these prices to fall too far – that could pose a risk to the Russian economy’” said Phil Flynn, analyst at Price Futures Group in Chicago.
U.S. crude’s discount to Brent was as much as $9.31, with Brent supported more as investors worried that crude supplies from Iran could be drying up, with U.S. sanctions deterring buyers.
“There’s more concern on the Brent side that supply losses from Iran are harder to be made up,” Flynn said.
India’s Reliance Industries Ltd, owner of the world’s biggest refining complex, plans to halt oil imports from Iran, two sources familiar with the matter said.
Also supporting prices was a weaker dollar and forecasts that U.S. data will show crude inventories fell last week, analysts said.
Industry group American Petroleum Institute (API) releases its weekly supply report at 4:30 p.m. EDT on Wednesday, followed by the official data on Thursday.
In Brazil, the FUP oil workers union said workers had joined the call for a nationwide strike on at least 20 oil rigs in the lucrative Campos basin and other areas of the country. Protesters are calling for the resignation of Petroleo Brasileiro SA Chief Executive Officer Pedro Parente and a change to company fuel pricing policies. The company said production was not affected.