Oil prices rose on Wednesday after the European Union, the world’s largest trading bloc, outlined plans to phase out Russian oil imports, raising fears of further market tension.
Benchmark crude oil contracts have risen steadily over the past two months following Moscow’s invasion of Ukraine.
Until now, the European Union has been reluctant to completely cut off Russian oil and gas imports, and its plans still do not suggest a complete ban for all EU members.
Europe imports some 3.5 million barrels of Russian oil and oil products daily, and is also dependent on gas supplies from Moscow.
“Inventories are very tight, so in this context, when you talk about a ban, there are a lot of questions about how (Europe) is going to offset this,” said Phil Flynn, senior analyst at Price Futures Group.
Brent crude futures rose $5.17, or 4.9%, to $110.14 a barrel. West Texas Intermediate crude futures settled at $107.81 a barrel, up $5.40, or 5.3 percent.
European Commission President Ursula von der Leyen on Wednesday proposed a phased oil embargo on Russia, in addition to sanctioning its main bank. The measures include phasing out Russian crude supplies within six months and refined products by the end of 2022, she von der Leyen said. She also promised to minimize the impact of the measure on European economies.
However, Hungary and Slovakia will be able to continue buying Russian crude until the end of 2023 under existing contracts, an EU source told Reuters.
Russia could compensate for the loss of one of its main clients by selling crude to other importers, such as India and China. Neither of them has stopped buying from Moscow.
Needs for a much larger supply are not likely to be met at Thursday’s meeting of the Organization of the Petroleum Exporting Countries and allied producers. OPEC+ is expected to maintain its plan to gradually increase monthly production.
In the United States, crude oil inventories rose modestly last week, according to the US Energy Information Administration. Stocks rose 1.2 million barrels as the United States released more strategic reserves.