Oil prices extended gains in early Asian trade on Wednesday as geopolitical tensions simmered with Russia warning of gas supply cuts to Poland and Bulgaria while hopes of Chinese economic stimulus buoyed oil demand outlook.
Brent crude futures rose $1.27, or 1.2%, to $106.26 a barrel by 0143 GMT. U.S. West Texas Intermediate crude futures rose $1.11, or 1.1%, to $102.81 a barrel. Crude prices settled about 3% higher on Tuesday in volatile trade as the market is torn between supply and demand concerns over Russian oil and gas disruption and a worsening global economic outlook.
Russia’s Gazprom (GAZP.MM) has told Poland and Bulgaria it will halt gas supplies from Wednesday, in a major escalation of Russia’s broader row with the West over its invasion of Ukraine, which Moscow calls a “military operation”.
The news sent NYMEX ultra-low-sulfur diesel futures up more than 9% on Tuesday to settle at $4.47 a gallon, a record close. “Oil is supported via the escalation of geopolitical tensions,” Stephen Innes of SPI Asset Management said in a note. “Cutting gas flows is not new news, but it’s the timing of Russia plugging the gas flows when stagflationary fears are running rampant again.”
