By Adedapo Adesanya
Oil prices rose by more than 2 per cent on Friday as impending European Union (EU) sanctions on Russian crude imports raised the prospect of a tighter supply with promises to win over those that might hinder the move.
Brent crude rose by 2.01 per cent or $2.23 to sell at $113.1 per barrel as the West Texas Intermediate (WTI) crude appreciated by 2.19 per cent or $2.37 to sell at $110.6 a barrel.
Prices were buoyed by the EU’s proposal to phase out supplies of Russian crude oil in six months and refined products by the end of 2022.
It would also ban all shipping and insurance services for transporting Russian oil and reports emerged that the bloc is tweaking its sanctions plan in a bid to win over reluctant states like Hungary and Slovakia.
Should the EU draft see adoption, the oil market will be in for another supply squeeze as the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) has clearly indicated it values consistency over abrupt moves.
On Thursday, in a meeting that lasted only 13 minutes, OPEC+ countries agreed to increase their June 2022 production target by 432,000 barrels per day, avoiding any talk about sanctions on Russia and indicating global supply and demand picture is more or less balanced.
This is happening as some key producers like Nigeria and Libya are not reaching their targets, adding to the supply constraints.
Investors are also eyeing higher demand from the US this fall as the Joe Biden administration unveiled plans to buy 60 million barrels of crude for its emergency stockpiles.
Meanwhile, a US Senate committee passed the NOPEC bill that was presented with bipartisan support, potentially revoking the sovereign immunity protecting OPEC countries and Middle Eastern national oil companies from lawsuits, as high fuel prices and inflation will spur US lawmakers to take more aggressive action.
Strict COVID-19 curbs in China are creating headwinds in the second quarter for the world’s second-largest economy. The zero-tolerance approach, which depends on draconian lockdowns and mass testing, has weighed heavily on the economy and disrupted supply chains key to international trade.
