A pump jack is seen at sunrise near Bakersfield, California October 14, 2014. REUTERS/Lucy Nicholson
NEW YORK, April 28 – Oil rose on Thursday on an increased likelihood that Germany will join other European Union member states in an embargo on Russian oil, which could further tighten supplies in the already tight global crude market.
Traders responded to media reports of comments from German Economy Minister Robert Habeck on Tuesday, who said the EU’s largest economy could cope with an EU embargo on Russian oil imports and that Germany hoped to find ways to replace Russian oil with other supplies. Continue reading
“Germany’s apparent decision to lift its opposition to a Russian oil sanction appears to be a major contributor to a comprehensive EU ban that would further reduce the availability of Russian oil in a global market,” said Jim Ritterbusch, President of Ritterbusch and Associate in Galena, Illinois.
Brent crude futures were up $2.27 to $107.59 a barrel, while US West Texas Intermediate crude was up $3.34, or 3.3%, to $105.36.
Germany is heavily dependent on Russian energy imports and had spoken out against a total ban.
Before the war in Ukraine, Russian oil accounted for about a third of Germany’s supplies. A month ago, Habeck said the country had reduced its reliance on Russian oil to 25% of imports.
“As a result, free world oil will become more expensive and Iron Curtain oil will continue to depreciate and be more heavily discounted,” said John Kilduff, a partner at Again Capital LLC in New York.
Moscow has started using energy exports as a bludgeon after the United States and its allies responded to Russia’s invasion of Ukraine.
Russia has halted gas supplies to Poland and Bulgaria and is trying to pressure the EU into rolling out its new gas payment system, which involves opening accounts at Gazprombank where payments in euros or dollars would be converted into rubles. Continue reading
Russian oil production could fall by as much as 17% in 2022 as the country grapples with Western sanctions, according to a Reuters document from the Economy Ministry. Continue reading
Despite this expected deficit, the OPEC+ group of producers, made up of the Organization of Petroleum Exporting Countries and allies led by Russia, is expected to maintain its modest pace of output increases at their May 5 meeting, sources told Reuters. Continue reading
The US dollar rose to its highest level in two decades on Thursday, buoyed by weakness in its main rivals including the yen and the euro. A stronger dollar is usually bearish for oil prices valued in greenback as it becomes more expensive for holders of other currencies.
In China, Beijing closed some public spaces and stepped up COVID-19 controls at others as most of the city’s 22 million residents conducted further mass testing to avert a Shanghai-like lockdown. The recent lockdown has disrupted factories and supply chains, fueling fears about the country’s economic growth. Continue reading
But Asia’s largest oil refiner, Sinopec Corp (600028.SS), expects the country’s demand for refined oil products to rebound in the second quarter as COVID-19 outbreaks are gradually brought under control. Continue reading
A slowdown in global growth due to higher commodity prices and an escalation in the Russia-Ukraine conflict could further exacerbate oil demand concerns.
Additional reporting by Ahmad Ghaddar and Mohi Narayan in Singapore Editing by David Goodman, Susan Fenton, David Gregorio and Sandra Maler