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Oil recovers from 16-week lows amid prospects of tighter Russian oil sanctions

Oil prices rose Thursday, ending a three-day loss streak and recovering from 16-week-lows, on the prospect of tighter sanctions against Russian crude. However, expectations of a higher supply due to an OPEC+ production boost next month capped the gains.

Brent crude futures rose 15 cents or 0.2% to $65.50 per barrel at 0116 GMT. U.S. West Texas Intermediate Crude climbed by 14 Cents, or 0.2% to $61.92 per barrel.

Brent and WTI lost about 1% on Wednesday. Brent closed at its lowest level since June 5, and WTI reached its lowest level since May 30.

As WTI approached its $60 support, increased geopolitical risk and speculations about tighter sanctions against Russian crude also contributed to the increase in buying interest, said Hiroyuki Kikukawa. He is chief strategist at Nissan Securities Investment, an arm of Nissan Securities.

The Group of Seven finance ministers announced on Wednesday that they would take measures to increase pressure against Russia, targeting those who continue to buy Russian oil at higher prices and those who facilitate circumvention.

The Wall Street Journal reported Wednesday that the U.S. also will provide Ukraine intelligence to launch long-range missiles against Russian energy infrastructure.

The WSJ reported that this will make it easier to strike refineries, pipelines, and other infrastructure in order to deprive the Kremlin revenue and oil.

Nissan's Kikukawa noted that despite the U.S. shutdown, the world economy was still impacted by the uncertainty. Expectations of a higher production from OPEC+ (the Organization of the Petroleum Exporting Countries) and its allies weighed heavily on the sentiment, limiting the gains in prices.

The U.S. administration of President Donald Trump on Wednesday frozen $26 billion in funding for Democratic-leaning States, following up on its threat to use the shutdown to target Democratic priority.

Three sources familiar with the discussions said that OPEC+ may agree to increase oil production in November by as much as 500,000 bpd, which is triple the October increase, because Saudi Arabia wants to reclaim its market share.

This would happen even if the U.S. demand and Asian demand begins to fall.

Energy Information Administration reported on Wednesday that U.S. crude, gasoline and distillate inventory rose last week due to a decline in refining and demand.

The crude oil inventories increased by 1.8m barrels, to 416.5m barrels for the week ending September 26. A poll had predicted a rise of 1m barrels. (Reporting and editing by Tom Hogue; Yuka Obayashi)

(source: Reuters)