Crude oil futures extend gains after 4-day rally with sentiment still firm

Crude oil futures were higher in mid-morning Asian trade April 19 as sentiment remained firm after a four-day rally on growing concerns over the possibility of a EU-wide ban on Russian oil imports and Libyan supply disruptions.

At 10:17 am Singapore time (0217 GMT), the ICE June Brent futures contract was up 38 cents/b (0.34%) from the previous close to $113.54/b, while the NYMEX May light sweet crude contract rose 25 cents/b (0.23%) at $108.46/b.

The front-month ICE Brent crude contract has added close to $15/b in value over the last four sessions alone, since falling to a three-week low of $97.57/b on April 11.

Sentiment has been boosted in recent days by the growing possibility of an EU-wide ban on Russian oil imports, while the bearish impact of a massive oil reserve release by the US and International Energy Agency members countries has mostly been priced in.

"Crude oil prices extended recent gains to $114/b, with the supply backdrop continuing to deteriorate," said ANZ Research analysts Brian Martin and Daniel Hynes in an April 19 note. "Last week, the IEA warned Russian production could drop by 1.5 million b/d in April, as tougher sanctions could make it difficult [to] find buyers."

Libya on April 18 shut its biggest oil field, Sharara, and declared force majeure on its Zueitina oil port, after "individuals" entered the terminal and prevented workers from continuing exports, S&P Global Commodity Insights reported earlier. The Sharara field pumps 300,000 b/d.

This comes shortly after it declared force majeure April 17 on deliveries of Mellitah crude oil exports after the 70,000 b/d El Feel oil field was shut.

"Libya's oil output disruption added a further bullish tinge to an already undersupplied market ... This has outweighed some of the rising demand concerns due to lockdowns in China," Martin and Hynes said.

In the near term, investors will be keeping a close watch on whether the EU moves ahead with any restrictions on Russian oil imports. While the EU has reduced oil imports from Russia to some extent since the war in Ukraine started, several member countries nonetheless remain heavily reliant on Russian energy.

"Given public opinion, the EU is increasingly likely to adopt a phased-in ban on Russian oil, and this thought alone should be a sufficient enough bullish catalyst to keep oil bid on dips," said SPI Asset Management Managing Partner Stephen Innes in an April 19 note.

"If the EU steps up to the plate with an oil embargo, it will be challenging for US oil to backfill the EU deficit."

Dubai crude swaps and intermonth spreads were higher in mid-morning trade in Asia April 19 from the previous close.

The June Dubai swap was pegged at $106.02/b at 10 am Singapore time (0200 GMT), up $2.04/b (1.96%) from the April 18 Asian market close.

The May-June Dubai swap intermonth spread was pegged at $1.83/b at 10 am, up 9 cents/b over the same period, and the June-July intermonth spread was pegged at $1.78/b, up 16 cents/b.

The June Brent/Dubai Exchange of Futures for Swaps spread was pegged at $7.31/b, up 8 cents/b.