Oil supply concerns

Oil surges to a yearly high as supply risks simmer in tight market. Oil climbed to its highest in almost nine months on concerns that a possible escalation of the conflict between Russia and Ukraine could choke off more supply in an already tight market. U.S. crude ended the session above $84 a barrel, breaking the previous high for the year set in April. Prices held on to gains even after investors focused on fuel supplies, which fell by the most in three months, after U.S. government data showed crude inventories rose by nearly 5 million barrels last week. “Demand concerns are not the issue because product inventories are low. It’s more of a market tightness story that’s driving oil,” Giovanni Staunovo, an analyst at UBS Group AG, said. He added that technical factors also supported prices after crude rose above its April high. The latest threat to supplies is the risk to Russian Black Sea flows after Ukrainian President Volodymyr Zelenskiy said his country would retaliate to prevent the OPEC+ producer from “blocking our waters.” The remarks followed a drone attack on an oil tanker in Ukraine over the weekend. Major market indicators have pointed to tighter markets in recent days. The most recent timeframe for U.S. crude rose on Wednesday, along with the equivalent of Brent. Inventories at the key storage hub in Cushing, Oklahoma, have been down for five of the past six weeks. Oil has risen since late June after fellow OPEC+ members Saudi Arabia and Russia pledged to cut supply, but headwinds remain. China’s economic recovery remains sluggish and the Energy Information Administration on Tuesday lowered its forecast for U.S. consumption of the product this year.