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Commodities

Oil Mixed on Week: Brent Falls Slightly, U.S. Crude up Amid Record Pump Prices

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© Reuters.

By Barani Krishnan

Investing.com — Crude prices were mixed on the week as trading neared Friday’s close, with global benchmark Brent showing a weekly loss amid a continued holdout by Europe on a Russian oil ban, while U.S. crude was almost flat on strong summer demand bets and supply tightness that have pushed pump prices to record highs.

Both Brent and U.S. crude’s West Texas Intermediate benchmark were up more than 3% in Friday’s intraday trade, extending their recovery from a near 10% loss in the first two days of the week sparked by fears that America might be tipped into recession from aggressive rate hikes by the Federal Reserve trying to beat the worst inflation in 40 years.

By 1:30 PM ET (17:30 GMT), an hour to the close, London-traded Brent was at $111.19, up $3.74, or 3.5%, on the day. For the week, it was down 1.7%.

New York-traded WTI was at $110.08, up $3.95, or 3.7%. For the week though, it was down just 0.5%.

The divergence between Brent and WTI is “a story of two oils,” said John Kilduff, partner at New York energy hedge fund Again Capital. “The hold out of an European embargo, particularly by Hungary is limiting Brent’s upside, while WTI is basking in bullish glory from the refining crunch in fuels that’s sent pump prices to record highs.”

Some European Union nations said on Friday that the push to ban Russian oil should probably be delayed to prioritize other sanctions against Moscow, particularly if the bloc could not win immediate consensus from Budapest for an embargo.

Saudi Arabia’s Energy Minister Abdulaziz bin Salman, meanwhile, tried to avert any blame on OPEC+ for the record high pump prices in the United States, saying it was a lack of U.S. refining capacity that was responsible for the crisis rather than supply from the global oil exporters alliance.

“The bottleneck is now to do with refining,” Abdulaziz told Bloomberg in an interview. “I did warn this was coming back in October. Many refineries in the world, especially in Europe and the US, have closed over the last few years. The world is running out of energy capacity at all levels.”

Record-high fuel prices are testing the mettle of U.S. consumers, with gasoline at above $4.50 per gallon at some US pumps while diesel retails at above $6.

The International Energy Agency cautioned on Thursday that soaring pump prices and slowing economic growth are expected to significantly curb the demand recovery through the remainder of the year and into 2023. 

Economists, meanwhile, warn that the US economy, finally on the path to resilience after the damage wrought by the two-year-long coronavirus pandemic, could head for recession again from a one-two punch delivered by record-high fuel prices and Fed rate hikes.

Commodities

Kyiv rules out ceasefire as Russia steps up offensive in Ukraine’s east

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6/6

© Reuters. A local resident walks by a destroyed building after a rocket attack on a university campus, amid Russia’s invasion, in Bakhmut, in the Donetsk region, Ukraine, May 21, 2022. REUTERS/Carlos Barria

2/6

By Natalia Zinets

KYIV (Reuters) – Ukraine ruled out a ceasefire or concessions to Moscow while Russia intensified an offensive in the eastern Donbas region and stopped sending gas to Finland in its latest salvo in response to Western sanctions and its deepening international isolation.

Polish President Andrzej Duda, who met President Volodymyr Zelenskiy in Kyiv last month, was back to address the Ukrainian parliament on Sunday, the first foreign leader to do so in person.

After ending weeks of resistance by the last Ukrainian fighters in the strategic southeastern port of Mariupol, Russia is waging a major offensive in Luhansk, one of two provinces in Donbas.

Russian-backed separatists already controlled swathes of Luhansk and the neighbouring Donetsk provinces before Russia invaded Ukraine on Feb. 24, but Moscow wants to seize the last remaining Ukrainian-held territory in the region.

On the Donetsk frontline, Russian forces were trying to break through Ukrainian defences to reach the administrative borders of the Luhansk region, while further north they continued heavy shelling of Sievierodonetsk and Lysychansk, Ukraine’s general staff said in its daily update on Sunday.

Sievierodonetsk and its twin Lysychansk across the Siverskiy Donets River form the eastern part of a Ukrainian-held pocket that Russia has been trying to overrun since mid-April after failing to capture Kyiv and shifting its focus to the east and south of the country.

The British Defence Ministry said on Sunday that Russia was deploying its BMP-T “Terminator” tank-support vehicles in that offensive. With only 10 available for a unit that already suffered heavy losses in the failed attempt on Kyiv, however, the ministry said they were “unlikely to have a significant impact”.

Ukraine’s lead negotiator, speaking to Reuters on Saturday, ruled out a ceasefire or any deal with Moscow that involved ceding territory. Making concessions would backfire because Russia would hit back harder after any break in fighting, Zelenskiy’s adviser Mykhailo Podolyak said.

“The war will not stop. It will just be put on pause for some time,” Podolyak said in an interview in the heavily guarded presidential office. “They’ll start a new offensive, even more bloody and large-scale.”

Recent calls for an immediate ceasefire have come from U.S. Defense Secretary Lloyd Austin and Italian Prime Minister Mario Draghi.

The end of fighting in Mariupol, the biggest city Russia has captured, gives Russian President Vladimir Putin a rare victory after a series of setbacks in nearly three months of combat.

The last Ukrainian forces holed up Mariupol’s vast Azovstal steelworks have surrendered, the Russian defence ministry said on Friday.

Full control of Mariupol gives Russia command of a land route linking the Crimean Peninsula, which Moscow seized in 2014, with mainland Russia and parts of eastern Ukraine held by pro-Russia separatists.

GAS DISPUTE

Russian state gas company Gazprom (MCX:GAZP) said on Saturday it had halted gas exports to Finland, which has refused Moscow’s demands to pay in roubles for Russian gas after Western countries imposed sanctions over the invasion.

Finland said it was prepared for the cutoff of Russian flows. It applied together with its Nordic neighbour Sweden on Wednesday to join the NATO military alliance, although that is facing resistance from NATO member Turkey.

Most European supply contracts are denominated in euros or dollars. Last month, Moscow cut off gas to Bulgaria and Poland after they rejected the new terms.

Western nations have also stepped up weapons supplies to Ukraine. On Saturday, Kyiv got another huge boost when U.S. President Joe Biden signed a bill to provide nearly $40 billion in military, economic and humanitarian aid.

Moscow says Western sanctions, along with arms deliveries for Kyiv, amount to a “proxy war” by the United States and its allies.

Putin calls the invasion a “special military operation” to disarm Ukraine and rid it of radical anti-Russian nationalists. Ukraine and its allies have dismissed that as a baseless pretext for the war, which has killed thousands of people in Ukraine, displaced millions and shattered cities.

Zelenskiy said he stressed the importance of more sanctions on Russia and unblocking Ukrainian ports in a call with Italy’s Draghi on Saturday.

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Commodities

Ukraine rules out ceasefire as fighting intensifies in Donbas

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5/5

© Reuters. A local resident walks by a destroyed building after a rocket attack on a university campus, amid Russia’s invasion, in Bakhmut, in the Donetsk region, Ukraine, May 21, 2022. REUTERS/Carlos Barria

2/5

By Tom Balmforth, Pavel Polityuk and Terje Solsvik

(Reuters) – Ukraine ruled out a ceasefire or concessions to Moscow while Russia intensified an offensive in the eastern Donbas region and stopped providing gas to Finland, as Polish President Andrzej Duda prepared to address the Ukrainian parliament on Sunday.

After ending weeks of resistance by the last Ukrainian fighters in the strategic southeastern city of Mariupol, Russia is waging a major offensive in Luhansk, one of two provinces in Donbas.

Russian-backed separatists already controlled swathes of territory in Luhansk and the neighbouring Donetsk province before the Feb. 24 invasion, but Moscow wants to seize the last remaining Ukrainian-held territory in Donbas.

“The situation in Donbas is extremely difficult,” Ukrainian President Volodymyr Zelenskiy said in his nightly address. The Russian army was trying to attack the cities of Sloviansk and Sievierodonetsk, but Ukrainian forces were holding off their advance, he said.

Zelenskiy adviser Mykhailo Podolyak ruled out agreeing to a ceasefire and said Kyiv would not accept any deal with Moscow that involved ceding territory. Making concessions would backfire on Ukraine because Russia would hit back harder after any break in fighting, he said.

“The war will not stop (after concessions). It will just be put on pause for some time,” Podolyak, Ukraine’s lead negotiator, told Reuters in an interview in the heavily guarded presidential office. “They’ll start a new offensive, even more bloody and large-scale.”

Recent calls for an immediate ceasefire have come from U.S. Defense Secretary Lloyd Austin and Italian Prime Minister Mario Draghi.

The end of fighting in Mariupol, the biggest city Russia has captured, gives Russian President Vladimir Putin a rare victory after a series of setbacks in nearly three months of combat.

The last Ukrainian forces holed up Mariupol’s vast Azovstal steelworks surrendered on Friday, Russia said.

Full control of Mariupol gives Russia command of a land route linking the Crimean Peninsula, which Moscow seized in 2014, with mainland Russia and areas of eastern Ukraine held by pro-Russia separatists.

Ukrainian forces in the separatist-controlled regions of Luhansk and Donetsk said on Saturday they had repelled nine attacks and destroyed five tanks and 10 other armoured vehicles in the previous 24 hours.

Russian forces were using aircraft, artillery, tanks, rockets, mortars and missiles along the entire front line to attack civilian structures and residential areas, the Ukrainians said in a Facebook (NASDAQ:FB) post. At least seven people had been killed in the Donetsk region, they said.

Russian troops destroyed a bridge on the Siverskiy Donets River between Sievierodonetsk and Lysychansk, Luhansk regional governor Serhiy Gaidai said. There was fighting on the outskirts of Sievierodonetsk from morning through the night, he said on the Telegram messaging app.

Sievierodonetsk and its twin Lysychansk across the Siverskiy Donets River form the eastern part of a Ukrainian-held pocket that Russia has been trying to overrun since mid-April after failing to capture Kyiv.

GAS DISPUTE

Russia’s state gas company, Gazprom (MCX:GAZP), said it had halted gas exports to Finland, which has refused Moscow’s demands to pay in roubles for Russian gas after Western countries imposed sanctions over the invasion.

Finland and Sweden applied this week to join the NATO military alliance.

Finnish state-owned gas wholesaler Gasum, the Finnish government and individual gas-consuming companies in Finland have said they were prepared for a shutdown of Russian flows.

Most European supply contracts are denominated in euros or dollars. Last month, Moscow cut off gas to Bulgaria and Poland after they refused to comply with the new terms.

Western nations also have stepped up weapons supplies to Ukraine. On Saturday, Kyiv got another huge boost when U.S. President Joe Biden signed a bill to provide nearly $40 billion in military, economic and humanitarian aid.

Moscow says Western sanctions, along with arms deliveries for Kyiv, amount to a “proxy war” by the United States and its allies. Thousands of people in Ukraine have been killed in the war that has displaced millions and shattered cities.

Zelenskiy said he stressed the importance of more sanctions on Russia and unblocking Ukrainian ports in a call with Draghi on Saturday.

Duda, who also met with Zelenskiy in Kyiv last month, is the first head of state to address parliament in person since the invasion, his office said.

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Commodities

Indian government trims tax on fuel, essential commodities to fight inflation

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© Reuters. FILE PHOTO: A worker holds a nozzle to pump petrol into a vehicle at a fuel station in Mumbai, India, May 21, 2018. REUTERS/Francis Mascarenhas

By Munsif Vengattil

NEW DELHI (Reuters) – India on Saturday announced a series of changes to the tax structure levied on crucial commodities in a bid to insulate consumers from rising prices amid high inflation.

Finance Minister Nirmala Sitharaman announced a cut in excise duty on petrol by 8 rupees ($0.1028) per litre, and 6 rupees per litre on diesel.

The new tax regime on petrol and diesel could result in a loss of about 1 trillion Indian rupees to the government in annual revenue due to the lower collection, she said in a series of tweets.

The government also removed the import duty on anthracite, PCI coal and coking coal in a bid to reduce raw material costs for local market demand.

The latest measures will be effective from May 22, the government said in a notification after the announcement by Sitharaman, who also urged state governments to follow suit with similar reductions on fuel prices keeping in line with federal plans.

A litre of petrol currently costs 105.41 rupees, while diesel is at 96.67 rupees in New Delhi.

The government will also provide a fresh subsidy of 200 rupees per cooking gas cylinder to over 90 million beneficiaries under a welfare scheme introduced for women below the poverty line.

The subsidy will have an annual revenue implication of nearly 61 billion Indian rupees, Sitharaman said.

“Prime Minister Narendra Modi has specifically asked all arms of the government to work with sensitivity and give relief to the common man,” she said.

The government was also working to reduce taxes on raw materials for plastic products to lower down the cost of final products.

Experts said the latest moves will likely increase fiscal concerns and raise doubts about government meeting its deficit target of 6.4% of GDP for 2022-23.

But inflation has become a major headache for Modi’s government ahead of elections to several Indian state assemblies this year.

A sharp jump in inflation meant input costs escalated for businesses.

The rise prompted the central bank to hike interest rates at an unscheduled policy meeting this month.

“Today’s decisions, especially the one relating to a significant drop in petrol and diesel prices, will positively impact various sectors, provide relief to our citizens,” Modi wrote on Twitter (NYSE:TWTR). “It is always people first for us!”

($1 = 77.8500 Indian rupees)

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