Oil prices stabilize as possible EU embargo on Russian oil increases

A forklift at sunrise near Bakersfield, California, October 14, 2014. REUTERS/Lucy Nicholson

NEW YORK (Reuters) – Oil settled higher on Thursday as Germany was increasingly likely to join other European Union members in a ban on Russian oil, which could further tighten supplies in an already stressed global crude market.

Traders were responding to media reports on Tuesday’s comments from German Economy Minister Robert Habeck, who said the EU’s largest economy could handle the EU’s ban on Russian oil imports, and Germany hoped to find ways to replace Russian oil with other supplies. Read more

said Jim Ritterbusch, president of Ritterbusch and Associate in Galena, Illinois.

Brent crude futures rose $2.27 to settle at $107.59 a barrel, while US West Texas Intermediate crude rose $3.34, or 3.3 percent, to $105.36.

Germany is highly dependent on Russian energy imports and has opposed a complete ban on them.

Before the war in Ukraine, Russian oil represented about a third of Germany’s supply. A month ago, Habek said his country had reduced its dependence on Russian oil to 25% of imports.

“As a result, oil from the free world will be more expensive, the value of Iron Curtain oil will fall further and it will be discounted even more,” said John Kilduff, partner at Again Capital LLC in New York.

Moscow began using energy exports as a cudgel following the response of the United States and its allies to Russia’s invasion of Ukraine.

Russia has cut off gas supplies to Poland and Bulgaria and is trying to get the European Union to adopt its new gas payment system that involves opening accounts in Gazprombank where payments in euros or dollars will be converted into rubles. Read more

Russian oil production could fall as much as 17% in 2022, according to an Economy Ministry document seen by Reuters, as the country grapples with Western sanctions. Read more

Sources told Reuters that despite this expected shortfall, the OPEC + producer group that includes the Organization of the Petroleum Exporting Countries and allies led by Russia is expected to maintain its modest pace to increase production when it meets on May 5. Read more

The US dollar rose to a two-decade high on Thursday, driven by weakness in its main rivals, such as the yen and the euro. The stronger dollar is usually bearish for oil prices quoted in dollars, because it makes it more expensive for holders of other currencies.

In China, Beijing has closed some public places and stepped up COVID-19 checks elsewhere as most of the city’s 22 million residents embarked on more mass testing in a bid to avoid a Shanghai-like lockdown. The recent shutdown has disrupted factories and supply chains, raising concerns about the country’s economic growth. Read more

But Sinopec is the largest oil refiner in Asia (600028.SS), expects the country’s demand for refined petroleum products to recover in the second quarter as the COVID-19 outbreak is gradually brought under control. Read more

A slowdown in global growth due to rising commodity prices and an escalation of the Russia-Ukrainian conflict may exacerbate oil demand concerns.

Additional reporting by Ahmed Ghaddar and Mohi Narayan from Singapore; Editing by David Goodman, Susan Fenton, David Gregorio and Sandra Mahler

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