Oil Up as Russia’s Gas Reduction to Europe May Lead to a Switch to Crude

By Zhang Mengying

Investing.com – Oil was up on Tuesday morning in Asia on expectations that Russia’s reduction in natural gas supply to Europe could encourage a switch to crude. But concerns over weakening fuel demand on an expected U.S. interest rate hike capped the gains.

Brent oil futures rose 1.44% to $101.63 by 12:12 AM ET (4:12 AM GMT) and crude oil WTI futures gained 1.41% to $98.05.

Russia reduced its gas supply to Europe on Monday as Gazprom (MCX:GAZP) said supplies through the Nord Stream 1 pipeline to Germany would drop to just 20% of capacity. The move will leave countries unable to meet their goals to refill natural gas storage.

“Higher gas prices, triggered by Russia’s gas squeeze, could lead to additional switching to crude from gas and support oil prices,” Nissan Securities general manager of research Hiroyuki Kikukawa told Reuters.

“But a tug-of-war between concerns about weakening demand due to the economic slowdown amid rising U.S. interest rates and fears of supply risk because of prolonged Russia-Ukraine conflict will likely continue for some time,” he said, predicting WTI to remain in a trading range centered on $100 a barrel.

The U.S. Federal Reserve concludes its two-day meeting on Wednesday, where it is widely expected to raise interest rates by 75 basis points.

Investors now await U.S. crude supply data from the American Petroleum Institute, due later in the day.