Oil prices rose on Friday as Ukrainian drone attacks on Russian energy infrastructure cut the country's fuel exports.

Brent crude futures closed at $70.13 per barrel, up 71 cents, or 1.02%. U.S. West Texas Intermediate (WTI) crude closed at $65.72 per barrel, up 74 cents, or 1.14%.

Both benchmarks are expected to post their biggest gains since mid-June. "The market continues to focus on the situation between Russia and Ukraine," said John Kilduff, a partner at Again Capital. "These drone attacks by Ukraine are starting to escalate."

Russia will impose a partial ban on diesel exports until the end of the year and extend an existing ban on gasoline exports, Deputy Prime Minister Alexander Novak said on Thursday. Reduced refining capacity has left some Russian regions facing shortages of certain types of fuel. In addition to the drone attacks, Andrew Lipow, president of Lipow Oil Associates, said the U.S. government's actions were also supportive.

"President Trump continues to pressure US allies to reduce Russian imports," Lipow said. "We'll likely see India and Turkey reduce some of their Russian imports." NATO's warnings about responding to further violations of member states' airspace have heightened tensions stemming from the war in Ukraine and raised the prospect of additional sanctions on Russia's oil industry, said ANZ analyst Daniel Hynes.

On the supply side, crude oil exports are scheduled to resume on Saturday from the semi-autonomous Kurdistan region of Iraq, the state news agency reported, citing state marketing company SOMO, which will transport the oil via pipeline to the Turkish port of Ceyhan.

"The market will be watching Kurdish production to see what will increase supply," Lipow said. On the demand side, US gross domestic product increased at an upwardly revised 3.8% annual rate last quarter, according to the Commerce Department's Bureau of Economic Analysis in its latest estimate on Thursday.

"If Russian supplies to China and India change, they will be looking for supplies," said Kilduff of Again Capital. "US economic data is good. And with the Fed easing interest rates, that will contribute to demand."

However, stronger-than-expected economic data could make the US Federal Reserve more cautious in cutting interest rates after last week's 25 basis point cut, the first since December. (alg)

Source: Reuters