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Oil rises on news EU may phase in a ban on Russian oil imports


© Reuters. FILE PHOTO: Workers walk as oil pumps are seen in the background in the Uzen oil and gas field in the Mangistau Region of Kazakhstan November 13, 2021. REUTERS/Pavel Mikheyev

By Arathy Somasekhar

HOUSTON – Oil prices edged higher on Thursday in thin trade ahead of a long weekend as traders weighed news of a possible European ban on Russian oil imports against a larger-than-expected build in U.S. oil stocks and falling refining activity in China.

Brent futures were up 42 cents, or 0.4%, at $109.17 a barrel, while U.S. West Texas Intermediate futures were 23 cents or 0.22% higher at $104.39 a barrel at 1223 ET or 1622 GMT.

While the European Union has not imposed a ban on imports of Russian oil in response to Russia’s invasion of Ukraine, the New York Times reported that EU officials were drafting an embargo on Russian oil products.

That comes as Chinese refiners are set to cut crude throughput this month by about 6% – a scale last seen in the early days of the COVID-19 pandemic two years ago – to ease bulging fuel inventories as recent COVID lockdowns undercut consumption, industry sources and analysts said.

Despite signals that global supply disruption will persist, U.S. oil stocks rose by more than 9 million barrels last week, the U.S. Energy Information Administration said on Wednesday, driven in part by releases from the nation’s strategic reserves.

Analysts in a Reuters poll had anticipated just an 863,000-barrel build.

Ricardo Evangelista, senior analyst at ActivTrades, said while the stock build and a drop in market activity due to the long weekend in Europe, America and most of Asia were pressuring oil, positive factors remained.

“The outlook for the price of the barrel remains very much tilted to the upside – demand remains amidst tight supply,” he added.

U.S. gasoline stocks fell 3.6 million barrels last week, far more than anticipated, and distillate inventories also declined.

Both contracts on Wednesday shrugged off a build in U.S. crude inventories to end the trading session more than 4% higher.

U.S. oil production forecasts are being revised upwards despite labor and supply chain constraints as higher prices spur more drilling and well completion activity, according to industry experts.

The International Energy Agency on Wednesday warned that from May onwards roughly 3 million barrels per day of Russian oil could be shut in due to sanctions or buyers voluntarily shunning Russian cargoes.

At the same time, major global trading houses are also planning to curtail crude and fuel purchases from Russia’s state-controlled oil companies in May, Reuters reported on Wednesday.

Russia’s Energy Ministry said on Thursday it was limiting access to its statistics on oil and gas production and exports.

Trade was going to continue to be “somewhat nervous” as the war between Russia and Ukraine continues and as countries weigh banning Russian supplies, Price Futures Group analyst Phil Flynn said.

“The big question is going to be, how many people are going to want to be short oil going into the long weekend?”

Traders were also jockeying for position as U.S. May crude options were set to expire on Thursday.

The probability of an EU ban on Russian oil being agreed may be almost zero, but no one will be able or wanting to say that clearly, Vandana Hari, founder of oil market analysis provider Vanda Insights, said.

“Even a continuing sabre-rattling will be enough to keep the risk premium alive,” she said.

Oil edges higher ahead of long weekend on Russian supply woes

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