Oil prices rose by about $1 on Tuesday (November 11), boosted by the impact of the latest US sanctions on Russian oil and optimism over a potential end to the US government shutdown, although oversupply concerns capped gains.

Brent crude futures closed up $1.10, or 1.72%, at $65.16 a barrel. US West Texas Intermediate crude rose 91 cents, or 1.51%, to $61.04 a barrel. Investors continue to monitor the impact of US sanctions on Russia and their impact on crude and refined fuel markets.

Russia's Lukoil (LKOH.MM), opens a new tab, declared force majeure at an Iraqi oilfield it operates, sources told Reuters on Monday, marking the biggest impact of the sanctions imposed last month.

Restricted fuel exports due to sanctions are supporting oil prices amid a crude oversupply, said PVM analyst Tamas Varga. "New US sanctions on major oil producers and exporters, Russia, are weighing on product exports," Varga said. As a result, heating oil and gasoline are moving in the opposite direction from crude oil.

Middle Eastern producers Saudi Arabia, Iraq, and Kuwait will increase crude oil supplies to India in December as Indian refineries seek alternatives to Russian barrels, sources at four Indian refineries said on Tuesday.

The market is also supported by the fact that the longest government shutdown in US history could end this week after the Senate approved a compromise that would restore federal funding. "Optimism around the reopening of the government is boosting demand expectations," said Phil Flynn, senior analyst at Price Futures Group.

The Republican-controlled House of Representatives is scheduled to vote on the deal on Wednesday afternoon. However, concerns about a crude glut are hampering price gains. Earlier this month, OPEC+ agreed to raise its December production target by 137,000 barrels per day, but also agreed to delay the production increase in the first quarter of next year.

"The oil market also faces a significant supply glut in the coming year, so prices are likely to remain under pressure. The main cause of this oversupply is the significant supply expansion by OPEC+," Commerzbank analysts said in a note.

OPEC+, which includes the Organization of the Petroleum Exporting Countries (OPEC) and allies such as Russia, has increased production by 2 million barrels per day since April, and the group's willingness to reverse voluntary production cuts further after a first-quarter pause could add an additional 1 million barrels per day in the coming year, Commerzbank said. (alg)

Source: Reuters