Oil gains as Russian output cuts offset rising US inventories

LONDON, Feb 24 (Reuters): Oil prices extended gains for a second session on Friday as the prospect of lower exports from Russia offset rising inventories in the United States and concerns over global economic activity.

Brent crude futures rose 89 cents, or 1.1 per cent, to $83.10 per barrel by 1042 GMT. On the anniversary of Russia's invasion of Ukraine, benchmark Brent crude prices were some 14 per cent lower than a year earlier. They hit a 14-year high of nearly $128 a barrel on Mar 8, 2022.

West Texas Intermediate US crude futures (WTI) were up 79 cents, or 1.05 per cent, to $76.18.

The benchmarks ended about 2.0 per cent higher in the previous session on Russia's plans to cut oil exports from its western ports by up to 25 per cent in March, which exceeded its announced production cuts of 500,000 barrels per day.

"Higher-than-expected US crude oil inventories continue to challenge the oil demand outlook, but expectations for lower Russian production have an offsetting impact," said Yeap Jun Rong, a market strategist at IG.

US inventories are at their highest level since May 2021.

US crude stocks rose by 7.6 million barrels to about 479 million barrels in the week to Feb 17, data from the US Energy Information Administration said.

And indications that Russian crude and refined products are accumulating on tankers floating at sea weighed further on the supply outlook.

JP Morgan said in a note on Friday that it sees short-term prices more likely to drift lower towards the $70s than rise "as global growth headwinds strengthen and excess 'dark' inventory exacerbated by a flooding of Russian oil is worked off".

The bank also said it expects the Organization of the Petroleum Exporting Countries (OPEC) to cut production in order to limit oil price declines.

For the week, oil prices are largely flat, after the previous week's declines of about 4.0 per cent, weighed also by concerns about rising interest rates that could strengthen the dollar and curb fuel demand.

Minutes from the latest US Federal Reserve meeting indicated that a majority of officials remained hawkish on inflation and tight labour market conditions, signalling further monetary tightening.

The prospect of further rate hikes supported the dollar index , which was set for a fourth-straight week of gains. The index is now up about 2.5 per cent for the month.