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Oil steadies near $110/bbl as strong dollar offsets Russian oil ban

Commodities May 05, 2022 12:31PM ET
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© Reuters. FILE PHOTO: A pump jack is seen at sunrise near Bakersfield, California October 14, 2014. REUTERS/Lucy Nicholson

By Scott DiSavino

NEW YORK (Reuters) - Oil prices steadied near $110 a barrel on Thursday as a stronger dollar and a drop in global stock markets offset supply concerns after the European Union laid out plans for new sanctions against Russia including an embargo on crude in six months.

Global benchmark Brent futures fell 41 cents, or 0.4%, to $109.73 a barrel by 11:54 a.m. EDT (1554 GMT), while U.S. West Texas Intermediate (WTI) crude fell 76 cents, or 0.7%, to $107.05.

The U.S. dollar rebounded on Thursday but held below 20-year highs reached last week, a day after the Federal Reserve affirmed that it would take aggressive steps to combat inflation but played down the prospect of even larger rate hikes.

A strong dollar makes oil more expensive for holders of other currencies.

The Nasdaq plunged 4.6% and the other major indexes tumbled on Thursday after Fed Chair Jerome Powell's less hawkish tone failed to ease investor expectations of bigger interest rate hikes this year.

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," Rystad Energy head of oil markets research Bjornar Tonhaugen said.

French Environment and Energy Minister Barbara Pompili expressed confidence that EU members 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," Investec's head of commodities, Callum Macpherson said. "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.

A U.S. Senate committee passed a bill that could expose OPEC+ to lawsuits for collusion on boosting oil prices. Versions of the legislation have failed in Congress for more than two decades, but lawmakers are increasingly worried about rising inflation driven in part by high gasoline prices.

Surging oil prices have lessened the pressure on energy-reliant Iran to revive a 2015 nuclear pact with world powers, which would ease sanctions and add more crude to world markets, three officials familiar with Tehran's thinking said.

The United States, meanwhile, said it will take bids this autumn to buy back 60 million barrels of crude oil for its Strategic Petroleum Reserve, the first step in replenishing the stockpile after a record-sized release this spring to help tame runaway energy prices.

Oil steadies near $110/bbl as strong dollar offsets Russian oil ban
 

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Comments (6)
Alan Rice
Alan Rice May 05, 2022 6:26PM ET
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Oil a steal under $200/bbl.
Manish Manish
Manish Manish May 05, 2022 11:52AM ET
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Biden made fool of Ukraine and EU Member's...Only his Administration is responsible for whole mess but they r enjoying this.
Maximus Maximus
Maximus Maximus May 05, 2022 11:52AM ET
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yeah sure, so putin had nothing to do with this? what planet are you on?
Yousef Mansoor
Yousef Mansoor May 05, 2022 5:25AM ET
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shell company printing money...shell is Europe company...did you get it?
Fadli Pratama
Fadli Pratama May 05, 2022 1:43AM ET
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the prices will skyrocket...EU dont care about the people...
Zaheer Khalfan
Zaheer Khalfan May 04, 2022 11:49PM ET
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Bloody criminals manipulating the price by spewing falsehood in the media causing price to skyrocket and making russia richer as they continue to supply o&g.
sharath naik
agsn May 04, 2022 11:37PM ET
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so EU stops buying from China, buys from others. china India reduces buying from others buys more of Russian oil. it's all balances out, end result zero.
trevor hron
trevor hron May 04, 2022 11:37PM ET
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There isnt enough transportation supply to reroute that much oil. There is no easy way to get around it. The market is already undersupplied and only going to get worse.
 
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