Oil prices jump 3% as EU plans ban on Russian oil

Brent crude futures rose 2.8 per cent while WTI crude futures rose 3 per cent. PHOTO: AFP/GETTY IMAGES

LONDON (REUTERS, BLOOMBERG) - Oil prices jumped on Wednesday (May 4) as the European Union, the world’s largest trading bloc, spelt out plans to phase out imports of Russian oil, offsetting demand worries in top importer China.

Brent crude futures rose US$2.94, or 2.8 per cent, to US$107.91 a barrel by 3.46pm Singapore time amid thin trading volume, with China and Japan closed for holidays. West Texas Intermediate crude futures rose US$3.02, or 3 per cent, to US$105.43 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 the end of 2022, Ms von der Leyen said. She also pledged to minimise the impact on European economies.

European energy prices jumped after the announcement as a ban, if agreed by EU governments, could boost demand for natural gas and coal while prompting Moscow to retaliate.

Benchmark gas futures for delivery next month surged as much as 7.4 per cent to €106.75 per megawatt-hour (MWh), while the equivalent British contract soared 9.8 per cent. German power for next year, a European benchmark, gained 5.4 per cent to €216 per MWh by 10.15am local time.

Europe relies on Russia for about 25 per cent of its oil and about a third of its gas needs.

The proposed EU sanctions, which also include cutting off more banks from the international Swift payment system, add to concern about energy supplies just a week after Gazprom gas halted shipments to Poland and Bulgaria due to a dispute over payment terms.

“Our central scenario envisions more interruptions of Russian gas supplies to Europe going forward,” said Mr Mark Haefele, chief investment officer at UBS Global Wealth Management. “Some of the targeted countries may experience economic stagnation or mild contractions in the process.”

He does not expect a complete halt in all Russian gas supplies to Europe.

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