Oil prices rose as the OPEC+ – which includes Saudi Arabia, the UAE, and Bahrain, among others – ratified a limited production increase following the European Union’s proposed ban on Russian imports. West Texas Intermediate passed $109 a barrel.
The OPEC+ group will nominally increase production by 432,000 barrels a day in June, though OPEC only managed an increase of just 10,000 barrels a day in April, indicating the difficulty the group is having in lifting output in line with its plan, Bloomberg reported.
Meanwhile, the EU plans to ban Russian crude over the next six months and refined fuels by year’s end to increase pressure on President Vladimir Putin over his war in Ukraine. The bloc is also targeting insurers in a move that could dramatically impair Moscow’s ability to ship oil around the world.
“Oil prices are searching for equilibrium, stuck in a tight range between $100 a barrel and $110 a barrel,” JPMorgan Chase & Co. analysts, including Natasha Kaneva, said in a note to clients. “Overall, we view a phase-out ban as the right ban.”
Oil has surged more than 40 percent this year as the war disrupted flows, inflation picked up, and central banks – including the US Federal Reserve – started tightening policy, Bloomberg reported.
The dollar was higher Thursday, 5 May, adding a headwind to crude, after the Fed hiked interest rates by the biggest margin since 2000.
At present, Russia’s oil exports are running at a record pace as Moscow manages to reroute cargoes previously sent to the US and elsewhere to alternative buyers, especially in Asia, according to the note.
The EU aims to conclude the sanctions package by the end of the week, or May 9 at the latest, according to diplomats.
To get the curbs over the line, the bloc needs to address concerns from Hungary and Slovakia on phaseout timing, and queries from Greece on banning transport of oil between third countries, Bloomberg added.
Oil markets remain in backwardation, a bullish pattern marked by near-term prices trading above longer-dated ones. Among key differentials, the spread between Brent’s two nearest December contracts was above $13 a barrel Thursday. That’s more than triple the gap at the start of the year.
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