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Oil rises as EU to phase in Russian oil ban, Shanghai ends lockdown

Commodities Jun 01, 2022 03:07PM ET
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© Reuters. FILE PHOTO: Pump jacks operate at sunset in an oil field in Midland, Texas U.S. August 22, 2018. REUTERS/Nick Oxford
 
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By David Gaffen

NEW YORK (Reuters) -Oil prices rose on Wednesday after European Union leaders agreed to a phased ban on Russian oil and as China ended its COVID-19 lockdown in Shanghai, which could bolster demand in an already tight market.

Oil benchmarks have marched steadily higher for several weeks as Russian shipments are squeezed by EU and U.S. sanctions and as India and China can only buy so much from Russia, the world's largest exporter of crude and fuel.

Brent crude settled at $116.29 a barrel, a gain of 69 cents, or 0.6%, while U.S. West Texas Intermediate crude gained 59 cents, or 0.5%, to $115.26.

EU leaders agreed in principle on Monday to cut 90% of oil imports from Russia by the end of this year, the bloc's toughest sanctions yet since the start of the invasion of Ukraine, which Moscow calls a "special military operation".

"The impact of the sanctions becoming formalized is significant," said Bill Farren-Price, director at Enverus in London. "If they achieve near what they’re intending to, Russia is going to lose about 3 million barrels (in daily exports) and not all of that can be diverted, so it's quite significant."

Sanctions on crude will be phased in over six months and on refined products over eight months. The embargo exempts pipeline oil from Russia as a concession to Hungary and two other landlocked Central European states.

In China, Shanghai's strict COVID-19 lockdown ended on Wednesday after two months, prompting expectations of firmer fuel demand.

Two OPEC+ sources said on Wednesday that members did not discuss the idea of suspending Russia from the current oil supply deal, after the Wall Street Journal reported on Tuesday that such a move was under consideration.

OPEC+ comprises members of the Organization of the Petroleum Exporting Countries and their allies led by Russia. The group is due to meet on Thursday to set policy.

The group has been criticized for not boosting output more quickly to deal with rising fuel prices, but Gulf nations have said most members of the cartel do not have the extra capacity to boost output.

"Do you really think (Saudi Arabia is) going to raise a million barrels a day? And if they do, global spare capacity will be under 2 million bpd," said Phil Flynn, analyst at Price Futures.

An OPEC+ technical committee on Wednesday trimmed its forecast for the 2022 oil market surplus by about 500,000 bpd to 1.4 million bpd, sources said.

U.S. crude oil production rose in March by more than 3% to 11.65 million bpd, the highest since November, the U.S. Energy Information Administration said on Tuesday.

The market edged off the day's highs after the release of the Federal Reserve's anecdotal report on economic conditions in the United States, which reported both increased inflationary pressures and strong demand.

Oil rises as EU to phase in Russian oil ban, Shanghai ends lockdown
 

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Comments (6)
Ali Asad
Ali Asad Jun 01, 2022 5:48PM ET
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can now
Nils Hullmann
Nils Hullmann Jun 01, 2022 8:07AM ET
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cant wait for lame duck season so all those dems crawl back into the hole...oh right twitter has already cleaned of this cesspool
Ac Tektrader
Ac Tektrader Jun 01, 2022 3:32AM ET
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supporters of Putin's bloodthirsty war against the Ukrainian democracy always blame biden for high oil prices....
Abdulla AlAli
Abdulla AlAli Jun 01, 2022 3:32AM ET
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Man biden stopped investing in refineries back before and Saudi warned from supply issue even without a war
Jo Riley
Jo Riley Jun 01, 2022 3:32AM ET
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Abdulla AlAli  Exactly.  The day Biden's gang took charge, investors reduced investment in oil due to unfavorable government policies.  Investment went down, price started rising - just look at the charts.
Tre Hsi
Tre Hsi Jun 01, 2022 3:32AM ET
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Abdulla AlAli  did US refinery capacity increase under The Donald's administration?  no?  hmmmm, I am guessing that's Biden's fault too?
Gary Moses
Gary Moses Jun 01, 2022 3:32AM ET
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Tre Hsi Just think abuut it. We have at least 2.5 more years for these right Wing ((trumpers)) to Complain.
Lim Kim Huat Huat
Lim Kim Huat Huat Jun 01, 2022 3:32AM ET
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Huat@unifi and a couple of other things to do in the morning and the other day I have a meeting with a friend who is going to be in town this weekend and will be in the office tomorrow for the rest of the week and I will be there on the project management project for the last bi weeks and will be in touch with you shortly after the meeting with the group of students who will be attending the meeting on Friday and will be in touch with you shortly to discuss the details of the project management project for the last bi weeks of the event and will be in touch with you shortly after the meeting with the relevant executive Committee on the project management 6 and the project management project for the last bi years of the project management project for the last
Ac Tektrader
Ac Tektrader Jun 01, 2022 3:27AM ET
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william smith, amazing that we hear from the right wing Trump fanatics tryin to blame biden for high prices in crude using lies and misinformation. the oil industry has 10 years worth(+9000)) 0f unused leases at it's disposal. the oil industry, with it's management, decided holding the line on development; nearly 60% cited investor pressure to maintain "capital discipline" as the primary reason oil companies weren't drilling. the keystone pipeline was being built to move heavy crude from Canada to the shipping points along the Gulf Coast and shipped to East Asia to be refined for the markets in Asia and China.
Ac Tektrader
Ac Tektrader Jun 01, 2022 3:21AM ET
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Will Smith still spouting more right wing misinformation and lies.....
gab nea
gab nea Jun 01, 2022 1:43AM ET
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oil production is up 3% since November, great job Biden! best president since the loser, the hater, the grabber, the bankrupter, the sad form a human being.
 
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