Oil prices are rising sharply after the announcement of the head of the Commission, Ursula von der Leyen, that the countries of the European Union will gradually stop importing Russian oil and refined products.
In particular, the Brent July contract strengthened by 2.73% or $ 2.85 and its price is set at $ 108 a barrel.
Similarly, the American WTI sees its most active June contract up 2.8% or $ 2.9 with its price reaching $ 105,134 a barrel.
“We will gradually phase out the supply of Russian crude oil within six months and refined products by the end of the year,” Ursula von der Leyen told the European Parliament, a development that had been announced since last week, when the market began to invoices her.
“This is going to be a complete ban on imports of Russian crude and refined oil. It will not be easy. Some Member States are heavily dependent on Russian oil. But we have to work for that,” she said. It is noted that the proposal requires approval from all 27 EU countries to enter into force.
Germany used to be considered a major obstacle to imposing a European embargo on Russian oil, but Berlin’s representatives at European institutions reportedly said last week that the country no longer objected as long as it was given time to secure supplies from other producers.
In the same context, the German Minister of Economy, Robert Habeck, had stated that the largest economy in Europe hopes to have stopped all imports of crude oil from Russia within a few days.
At the same time, additional pressure on prices is exerted by the data on US stocks, which showed that in the week ended April 29 fell by 3.5 million barrels, while market estimates predicted a slight drop of 800 thousand barrels.
On the other hand, fears about crude demand – which work the other way around by balancing pressures – are coming from China, where further severe lockdowns are being extended to tackle the country’s new pandemic outbreak.
Characteristically, the global manufacturing PMI fell for the first time since April 2020 – when the covid-19 pandemic began to spread worldwide – largely due to limited manufacturing activity in China.
As Capital Economics’ Caroline Bain points out in a note, “the big picture is clearly negative for commodity demand,” adding that rising inflation and higher interest rates are beginning to cut spending.
“Although supply constraints may keep commodity prices high for some time, we believe that subdued demand will affect most prices later in the year and into 2023,” she said.
Source: Capital
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