Oil prices have rebounded from recent losses, as the prospect of fresh sanctions on Russia outweighed concerns of reduced demand following Shanghai’s extended lockdown and boosts in US oil supplies.
There are now growing fears of shortages in Europe, with the West ramping up sanctions following Russia’s decision to demand rouble payments for energy supplies from overseas buyers.
Brent crude futures were up 1.07 per cent to $107.80 per barrel, WTI Crude climbed 1.38 per cent to $103.40.
The European Union (EU) is planning to seize a share of Russian energy revenues from gas and oil imports to Europe to pay for the reconstruction of Ukraine.
This would mean a chunk of the revenues will be diverted from Russian energy companies to a special “escrow” bank account that has been set aside to be used for aid to Kyiv at a later date.
Expenditure on Kremlin-backed fossil fuels has totalled €19bn since Russia invaded Ukraine.
The proposal follows the EU’s proposal to ban coal imports from Russia into the trading bloc.
EU Commission President Ursula von der Leyen said: “These sanctions will not be our last sanctions. Yes, we have now banned coal but now we have to look into oil and we’ll have to look into the revenues that Russia gets from these fossil fuels.”
Ricardo Evangelista, senior analyst at ActivTrades, did not anticipate a further rally unless the EU targeted Russian oil supplies.
The trading bloc remains split over the prospect of oil and gas restrictions – although Lithuania has announced a domestic ban on gas while allies such as the UK and US have sanctioned Russian oil.
Evangelista said: “The new sanctions proposed by Western allies, which include a ban of coal imports, will leave Russian oil and gas exports untouched. As an EU ban on Russian oil imports remains possible – but is far from guaranteed – and demand side pressure eases due to the ongoing covid shutdown in China, the price of the barrel is likely to remain around the current levels in the near term, despite the stiffer stance from the West in relation to Moscow’s invasion of Ukraine.”
Nathan Piper, head of oil and gas research at Investec added: “Russia -Ukraine developments, against the backdrop of an already tight oil and gas market, mean we expect high oil and gas prices for the medium term.”