Oil prices jumped on Wednesday as the European Union, the world’s largest trading bloc, spelled out plans to phase out imports of Russian oil, offsetting demand worries in top importer China.
Brent crude futures rose $3.99, or 3.8 percent, to $108.96 a barrel by 1121 GMT. West Texas Intermediate crude futures rose $4.05, or 4 percent, to $106.46 a barrel.
European Commission President Ursula von der Leyen on Wednesday proposed a phased oil embargo on Russia over its war in Ukraine, as well as sanctioning Russia’s top bank, in a bid to deepen Moscow’s isolation.
The Commission’s measures include phasing out supplies of Russian crude within six months and refined products by end-2022, von der Leyen said. She also pledged to minimize the impact on European economies.
Hungary and Slovakia, however, will be able to continue buying Russian crude oil until the end of 2023 under existing contracts, an EU source told Reuters on Wednesday.
“Russian oil is now ‘bad oil’,” SEB chief commodities analyst Bjarne Schieldrop said.
“This energy war of ‘good oil’ versus ‘bad oil’ has just started,” he added.
Investors are also waiting for an announcement from the US Federal Reserve on Wednesday.
It is expected to intensify efforts to bring down high inflation by raising interest rates and reducing its balance sheet.
In the United States, crude and fuel stocks fell last week, according to market sources citing American Petroleum Institute figures. Crude stocks fell by 3.5 million barrels for the week ended April 29, they said.
This was more than an expected 800,000-barrel drop estimated in a Reuters poll.
US government data on stocks is due on Wednesday.
Oil prices fell more than 2 percent on Tuesday on demand worries stemming from China’s prolonged COVID-19 lockdowns that have curtailed travel plans during the Labour Day holiday season.
The global manufacturing purchasing managers index contracted in April for the first time since June 2020, with China’s lockdowns a key contributor, Caroline Bain, chief commodities economist at Capital Economics said in a note.
The Organization of the Petroleum Exporting Countries and their allies on Thursday are expected to stick to their policy for another monthly production increase.