Oil prices ‘jump’ Wednesday after finding support for European Union plan to gradually stop importing Russian oil and refined products, as announced by the head of the Commission Ursula von der Leyen.
“We will gradually phase out the supply of Russian crude oil within six months and refined products by the end of the year,” she told the European Parliament, in a development that had been announced since last week, when the market began to price it.
“This will 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.
The proposal requires approval from all 27 EU countries to enter into force. Representatives of European Union countries failed to reach an agreement today, but are expected to converge tomorrow, Thursday, an official familiar with the talks told Reuters.
Some countries have expressed concern about the measures, the source said. In particular, Hungary, Slovakia, the Czech Republic and Bulgaria are seeking exemptions from the European Union and a transitional period regarding the European embargo on Russian oil imports.
At the same time, the data for stocks in the US showed that in the week ended April 29, they fell by 3.5 million barrels, while market estimates predicted a small drop of 800 thousand barrels, which put some pressure on oil prices.
However, fears about crude demand – which work the other way around by balancing pressures – came from Chinawhere the strict lockdowns are further extended to deal with the new outbreak of the pandemic in the country.
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.
As it became known today, the OPEC + now forecasts a production surplus of 1.9 million barrels per day in 2022 amid a gradual reduction in demand throughout the year.
The previous estimate of the Organization and its allies predicted a significantly smaller surplus of 600 thousand barrels per day, but was revised upwards in the light of the impact of the Russian invasion of Ukraine, rising inflation and the “resurgence” of the pandemic in China due to Omicron variant.
In this climate, Brent’s July contract strengthened by 4.9% or $ 5.17 to reach a price of $ 110.14 per barrel.
Similarly, the American WTI saw his own most active contract in June to rise 5.3% or $ 5.40 with its price reaching $ 107.81 per barrel.
Source: Capital
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