Oil prices rose 2 percent on Friday on expectations of a drop in Russian crude supply, which helped offset worries of a hit to US transport fuel demand growth as a looming Arctic storm threatens travel during the holiday season.

Brent crude was up by $1.40, or 1.70 percent, to $82.38 a barrel at 1044 GMT, while US West Texas Intermediate (WTI) crude was at $78.98 a barrel, up $1.49, or nearly 2 percent higher.

Both contracts were on track to post a second weekly gain.

Russia’s Baltic oil exports could fall by 20 percent in December from the previous month after the European Union and G7 nations imposed sanctions and a price cap on Russian crude from December 5, according to traders and Reuters calculations.

Russia may cut oil output by 5 percent-7 percent in early 2023 as it responds to price caps, the RIA news agency cited Deputy Prime Minister Alexander Novak as saying on Friday.

"Crude prices are higher as energy traders focus on Moscow’s response to the price cap put on Russian oil and not so much the thousands of flight cancellations that will disrupt holiday travel," OANDA analyst Edward Moya said.

Also Read: Oil prices rise near 1% after price cap on Russian crude, OPEC+ meeting

More than 4,400 US flights have been cancelled over a two-day period due to the winter storm, coinciding with a holiday travel season that some predict could be the busiest ever.

On Thursday, oil prices on both sides of the Atlantic settled lower as flights were scrapped. The snow storm could also upend motorists’ plans to travel during Christmas and New Year, curbing gasoline consumption.

However, heating oil demand could be boosted as the extreme weather is expected to cause power outages.

"As US crude oil inventories fall and winter storms hit the US, cold temperatures are expected to extend southward to Texas, Florida, and the eastern states. Demand for heating oil will soar," Leon Li, an analyst at CMC Markets, said.

US crude stocks fell more than expected in the week to December 16 as imports dropped sharply.

However, surging COVID-19 cases in the world’s No.2 oil consumer China, concerns about further rate hikes globally and recession curbing fuel consumption limited oil’s price gains.

"The oil market’s biggest wildcard is China and optimism is still strong that the reopening will continue and eventually lead to more demand," OANDA’s Moya said.

Also Read: India to continue buying oil from all countries including Russia: Official

(Edited by : Anushka Sharma)