Oil rises as Russian gas cut to Europe

Oil rises as Russian gas cut to Europe

On Tuesday oil rises as Russian gas cut to Europe and it is expected that Europe will switch to crude oil. However, it is also a concern that the demand for oil can be weak because of an increase in US interest rates.

Russia tightened its gas compression on Europe on Monday while Gazprom said that supplies across the Nord Stream 1 Pipeline to Germany would fall to only 20% of the capacity.

The reduction of Russia’s supplies will leave the country unable to achieve its objectives to fulfill natural gas storage before the winter. Germany, the greatest economy in Europe, faces a potentially restricted gas supply to industry to keep its people warm during the winter season.

“The higher gas prices, triggered by the gas pressure from Russia, could lead to an additional switching to the crude oil and support oil prices,” said Hiroyuki Kikukawa, Director General of Research at Nissan Securities.

“But a war strip between concerns about the weakening of demand due to economic slowdown in the middle of the increasing interest rates of the United States and fears to supply risk due to the prolonged conflict of Russia-Ukraine will probably continue during some time, “he said, predicting WTI to remain in a negotiation range focused on $ 100 per barrel.

The US Central Bank is expected to increase interest rates by 75 basis points at the end of its policy meeting on Wednesday. An increase in that magnitude would effectively close the support of the era of a pandemic for the economy.

The gap between Brent and WTI has expanded to levels not seen since June 2019, as decreasing the demand for gasoline in the United States weighs on the crude oil, while the adjusted supply supports Brent.

Oil rises as Russian gas cut to Europe