OIL FUTURES: Brent, WTI crude benchmarks edge down; market stays strong

Brent and WTI crude oil benchmarks edged down in midday Europe trading May 27 after gaining throughout the week toward two-month highs amid tight supply and rising demand.

At 12:40 pm BST, ICE July Brent crude futures was down 48 cents/b on the day at $116.92/b while NYMEX July WTI futures fell 81 cents/b at $113.28/b.

The UK introduced May 26 a windfall tax on energy companies -- a temporary measure effective until 2025 that is expected to raise GBP5 billion.

The market remained divided over the newly announced measure. North sea oil and gas operators said this tax would make it less attractive for investors and lead to a production decrease. BP, which previously said the tax will not affect plans, is set to review its North Sea investments.

The government is also looking at extending this tax to electricity generators in future.

Across the Atlantic, increasing US refining activity drew down crude oil stockpiles. The upcoming Memorial Day weekend is when the summer driving season starts, and the market would watch whether high pump prices impact driving demand this year.

The market also would be following the OPEC+ meeting June 2 to see if the producer alliance addresses Western calls to increase crude output. Additionally, an EU summit May 30-31 will have Russian oil ban as its main focus, with an embargo still to be agreed among all the bloc's members. An interim measure to impose an EU tariff on Russian oil, supported by the US, is under discussion.

Commerzbank in a report raised its oil price forecast by $5 in each of the next three quarters. Crude prices are expected to rise less sharply due to the EU agreeing on a Russian oil embargo, according to Daniel Briesemann at Commerzbank. Although initially the ban would support prices but sufficient supply in the second half of the year would ease the pressure on the wider market, Commerzbank said.

The CBOE OVX index, an indicator of crude price volatility, was down slightly on the day at 46.03%.