Oil Down as EU Ban on Russian Supplies Faces Hungarian Resistance

© Reuters.

By Gina Lee

AiVIF.com – Oil was down on Tuesday morning in Asia, opening lower earlier in the session. The European Union (EU)'s move to enact a ban on Russian oil imports, which would tighten global supplies, ran into opposition from member country Hungary.

Brent oil futures edged down 0.18% to $114.03 by 12:17 AM ET (4:17 AM GMT) and WTI futures edged down 0.20% to $111.60.

EU foreign ministers failed in their attempts on Monday to get Hungary to lift its veto of the bloc’s proposed oil embargo on Russia in response to the invasion of Ukraine on Feb. 24. This leaves the EU short of full approval from all EU nations needed for the embargo to be implemented.

On the demand side, investors continued to digest Monday’s Chinese data that showed the economy processed 11% less crude oil in April than a year earlier. As COVID-19 lockdowns remain in place, daily throughput fell to the lowest since March 2020 as refiners slashed operations due to weaker consumption.

However, as Chinese demand drops, U.S. producers are increasing production to replenish inventories that have dwindled thanks to the war in Ukraine and recovery from COVID-19. Inventories in the Strategic Petroleum Reserve fell to 538 million barrels, the lowest since 1987, according to Monday’s data from the U.S. Department of Energy.

Meanwhile, oil output in the Permian in Texas and New Mexico, the biggest U.S. shale oil basin, is due to rise 88,000 barrels per day (bpd) to a record 5.219 million bpd in June 2022, the U.S. Energy Information Administration (EIA)’s productivity report said on Monday.

Investors now await U.S. crude oil supply data from the American Petroleum Institute, due later in the day.