Tue, June 18, 2024

Oil rallies on chances of EU ban on Russian crude

oil

On Friday, oil prices headed to a fifth monthly advance on the likelihood that Germany will join other European Union countries in banning Russian crude.

Brent crude futures jumped 1.35% or 1.52 points to $108.77 per barrel. The international benchmark extended Thursday’s upturn of 2.16% to $107.22 per barrel.

Then, US West Texas Intermediate oil contracts also added 1.11% or 1.22 points to $106.58 per barrel. It followed a jump of 2.94% to $105.02 per barrel yesterday.

Accordingly, traders reacted to the statements of Berlin Economy Minister Robert Habeck. He stated that the largest European economy could cope with an EU embargo on Moscow’s oil imports.

Then, the county hoped to find ways to replace Russian energy products with other supplies. The remark hinted at further tightening supplies in the already stressed global crude market.

Before the Ukraine crisis, the Kremlin accounted for a third of Germany’s supply, reflecting the heavy reliance on the country.

In line with this, German officials initially opposed a total ban on Russian oil. Nevertheless, a month ago, the country successfully reduced its dependence to 25.00% of its imports.

Moreover, Moscow has started to use energy exports as a form of blackmail. Subsequently, Russia halted gas supply to Poland and Bulgaria.

Its government also pushes the EU to adopt its new gas payments system that involves opening accounts at Gazprombank. The change will convert payments in euros or dollars into rubles.

This strategy followed the battering sanctions given by the West. As a result, Russian oil production could skid by 17.00% in 2022 as the country contends with the severe deterrents.

Despite this shortfall, experts anticipated the OPEC+ to maintain the modest pace of increasing output at their May 5 meeting.

Oil supply fears offset China lockdowns

Fears over Russian supply disruption outweighed the continued COVID-19 lockdowns in China, the world’s biggest oil importer.

Subsequently, Beijing closed some public spaces and stepped up its coronavirus checks. The city’s 22.00 million residents embarked on more mass testing to avert a Shanghai-like lockdown.

The most recent restrictions have disrupted factories and supply chains, raising worries over the country’s economic growth.

Nevertheless, Asia’s biggest oil refiner Sinopec projects the country’s demand for oil products to recover in the second quarter. The company cited that COVID-19 outbreaks are now under control compared to the previous period.

Meanwhile, extreme weather has slashed oil production by 80.00% in North Dakota, the third-largest oil-producing state in the US. As a result, daily production in the area posted at 1.10 million barrels, losing roughly 800,000 bpd.

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