Oil climbs on supply jitters as EU plans Russian oil ban
Published: 05:05 PM,May 05,2022 | EDITED : 08:05 PM,May 05,2022
LONDON: Oil prices extended gains on Thursday on supply concerns after the European Union laid out plans for new sanctions against Russia, including an embargo on crude in six months, and Opec+ again rebuffed consumer calls for a faster pace of output rises.
Brent crude was up $1.59, or 1.4 per cent, at $111.73 a barrel by 1231 GMT. US West Texas Intermediate crude rose $1.30, or 1.2 per cent, to $109.11. Both benchmarks gained more than $5 a barrel on Wednesday.
The EU sanctions proposal, which needs unanimous backing from the 27 countries in the bloc, includes phasing out imports of Russian refined products by the end of 2022 and a ban on all shipping and insurance services for transporting Russian oil.
'The oil market has not fully priced in the potential of an EU oil embargo, so higher crude prices are to be expected in the summer months if it's voted into law,' said Rystad Energy head of oil markets research Bjornar Tonhaugen.
French Environment and Energy Minister Barbara Pompili said she was confident EU member states would reach a consensus on sanctions by the end of this week.
'The planned EU oil embargo represents a massive logistical challenge for oil markets,' said Investec’s head of commodities, Callum Macpherson.
'Rerouting Russian output from Europe to willing buyers in Asia, in the presence of sanctions, is already so challenging that even Russia has admitted its production will decline significantly.'
Japan said it would face difficulties in immediately cutting off Russian oil imports over the invasion of Ukraine.
Opec+, which comprises the Organization of the Petroleum Exporting Countries, Russia and their allies, agreed to another modest monthly oil output increase, arguing that the producer group could not be blamed for disruptions to Russian supply.
Ignoring calls from Western nations for accelerating output hikes, the group agreed to raise June production by 432,000 barrels per day, in line with an existing plan to unwind curbs made in 2020 when the Covid-19 pandemic hammered demand.
Surging oil prices have eased pressure on the energy-reliant Iran to revive a 2015 nuclear pact with world powers, which would ease sanctions and add more crude to world markets, said three officials familiar with Tehran's thinking.
The US State Department said it was preparing both for a scenario where a nuclear deal was reached and for one where there was no agreement. (REUTERS)
Brent crude was up $1.59, or 1.4 per cent, at $111.73 a barrel by 1231 GMT. US West Texas Intermediate crude rose $1.30, or 1.2 per cent, to $109.11. Both benchmarks gained more than $5 a barrel on Wednesday.
The EU sanctions proposal, which needs unanimous backing from the 27 countries in the bloc, includes phasing out imports of Russian refined products by the end of 2022 and a ban on all shipping and insurance services for transporting Russian oil.
'The oil market has not fully priced in the potential of an EU oil embargo, so higher crude prices are to be expected in the summer months if it's voted into law,' said Rystad Energy head of oil markets research Bjornar Tonhaugen.
French Environment and Energy Minister Barbara Pompili said she was confident EU member states would reach a consensus on sanctions by the end of this week.
'The planned EU oil embargo represents a massive logistical challenge for oil markets,' said Investec’s head of commodities, Callum Macpherson.
'Rerouting Russian output from Europe to willing buyers in Asia, in the presence of sanctions, is already so challenging that even Russia has admitted its production will decline significantly.'
Japan said it would face difficulties in immediately cutting off Russian oil imports over the invasion of Ukraine.
Opec+, which comprises the Organization of the Petroleum Exporting Countries, Russia and their allies, agreed to another modest monthly oil output increase, arguing that the producer group could not be blamed for disruptions to Russian supply.
Ignoring calls from Western nations for accelerating output hikes, the group agreed to raise June production by 432,000 barrels per day, in line with an existing plan to unwind curbs made in 2020 when the Covid-19 pandemic hammered demand.
Surging oil prices have eased pressure on the energy-reliant Iran to revive a 2015 nuclear pact with world powers, which would ease sanctions and add more crude to world markets, said three officials familiar with Tehran's thinking.
The US State Department said it was preparing both for a scenario where a nuclear deal was reached and for one where there was no agreement. (REUTERS)