Oil climbs on supply concerns as EU lays out Russian oil ban

05 May Oil climbs on supply concerns as EU lays out Russian oil ban

Oil prices extended gains on Thursday on supply concerns after the European Union laid out plans for new sanctions against Russia, including an embargo on crude in six months, offsetting concerns over weaker Chinese demand.

Brent was up 36 cents, or 0.3%, at $110.50 a barrel by 0825 GMT, and U.S. West Texas Intermediate crude rose 11 cents, or 0.1%, to $107.92 a barrel.

Both benchmarks gained more than $5 a barrel on Wednesday.

The sanctions proposal, which needs unanimous backing by the 27 EU countries, also includes phasing out imports of Russian refined products by the end of 2022, and a ban on all shipping and insurance services for the transportation of Russian oil.

Meanwhile, in its meeting on Thursday, the Organization of the Petroleum Exporting Countries and allied producers, known as OPEC+, will likely stick to modest oil output increases arguing it is not responsible for geopolitics and supply disruptions.

OPEC Secretary General Mohammad Barkindo reiterated it was not possible for other producers to replace Russian supply, but expressed concerns about slowing demand for transportation fuels and petrochemicals in the world’s top importer, China, because of prolonged COVID-19 lockdowns.

A private-sector survey on Thursday showed China’s services sector activity contracted at the second-steepest rate on record in April under the effect of pandemic measures.

In Iran, surging oil prices have given its energy-reliant economy a breather and hence its clerical rulers are in no rush to revive a 2015 nuclear pact with world powers to ease sanctions, three officials familiar with Tehran’s thinking said.