Oil futures extended a rise Thursday, with the European Union seen moving closer to a ban on imports of Russian crude.
Price action
-
West Texas Intermediate crude for June delivery
CL.1,
+1.21% CLM22,
+1.21%
rose $1.40, or 1.3%, to $109.21 a barrel on the New York Mercantile Exchange. -
July Brent crude
BRN00,
+1.40% BRNN22,
+1.40% ,
the global benchmark, gained $1.64, or 1.5%, to trade at $111.78 a barrel on ICE Futures Europe. -
June natural-gas futures
NGM22,
+0.13%
were up 0.4%, at $8.504 per million British thermal units. -
June gasoline
RBM22,
+0.54%
rose 0.8% to $3.6824 a gallon, while June heating oil
HOM22,
-1.52%
dropped 1.1% to $4.15 a gallon.
Market drivers
Crude is building on gains seen after the EU on Wednesday laid out a plan that would ban imports of Russian crude within six months.
The timetable provides for an orderly change in trade flows, but there are risks, said Warren Patterson, head of commodities strategy at ING, in a note.
“There is the potential for Russia to halt oil flows to the EU before the wind-down period comes to an end, which would leave the EU scrambling to quickly find other supply,” he said. “In addition, there is the risk of secondary sanctions from the U.S. on Russian oil, which would make it difficult for any country to buy Russian oil.”
A tight supply and demand balance, means the market wouldn’t be able to cope with almost a full loss in Russian oil supply, “and so if we were to see this, we would see significantly higher prices,” Patterson said. “For now, we do not think secondary sanctions are likely, so this should allow the likes of India and China to increase their Russian oil purchases, freeing up other sources of supply for the EU.”
The Organization of the Petroleum Exporting Countries and their allies, a group known as OPEC+, agreed Thursday to lift production by 432,000 barrels a day in June. The move was widely expected and in keeping with the group’s plan to continue unwinding production cuts that were put in place in 2020 following the onset of the COVID-19 pandemic.
Read: Why OPEC+ keeps agreeing to oil production increases it can’t meet
This post was originally published on Market Watch
