Oil prices soar as group assesses Russian EU ban

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Led by OPEC kingpin Saudi Arabia, the OPEC+ energy alliance quickly agreed in late March to raise its production targets for May.

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The OPEC+ group of oil producers is seen as likely to approve a further small production increase for June on Thursday, amid lingering concerns over weak Chinese demand and shortly after the biggest The world’s trading bloc has presented proposals for new sanctions against Russian crude.

The influential energy alliance of OPEC and non-OPEC partners will meet by videoconference on Thursday afternoon to discuss the next phase of production policy.

OPEC+ ministers are widely expected to agree to raise production targets to 432,000 barrels per day for next month, sticking to an existing strategy of phasing out supply cuts record.

Led by OPEC kingpin Saudi Arabia, the group quickly agreed in late March to raise its production targets for May.

“OPEC+ is unlikely to supply additional oil to the market to resolve any market stress as they are very happy with prices holding above $100/bb,” said Ajay Parmar, senior analyst. of the oil market to the commodity intelligence service ICIS, in a research note.

“Any substantial increase in supplemental supply from OPEC+ will threaten these high prices, and so instead they are expected to continue with the slow recovery in market share through 2022,” Parmar said.

The group’s latest meeting comes amid an ongoing supply crisis. The European Union on Wednesday announced plans to ban Russian oil imports within six months and refined products by the end of the year as part of its latest round of economic sanctions.

The bloc’s proposed measures reflect widespread anger over Russian President Vladimir Putin’s unprovoked assault on Ukraine.

Of course, Russia is world’s third largest oil producer, behind the United States and Saudi Arabia, and the world’s largest exporter of crude to global markets. It is also a major producer and exporter of natural gas.

Oil prices jumped on the news on Wednesday, adding to gains made since the Kremlin launched its invasion on Feb. 24.

International benchmark Brent futures were trading at $110.60 in morning trading in London on Thursday, up 0.4% for the session, while US West Texas Intermediate futures rose higher. at $108.02, about 0.2% higher.

Stephen Brennock, a senior analyst at PVM Oil Associates in London, said OPEC+ would “remain indifferent” to the prospect of a growing Russian oil supply shortfall even as several member states struggle to meet their production targets. .

“The result is that the OPEC+ quota gap is set to widen. In other words, the oil group’s compliance rate with production cuts will only increase,” Brennock said in a research note. .

“All of this has the makings of a larger than expected supply shortfall over the coming months. The tighter supply backdrop bodes well for prices and should give the upper hand to bulls in oil, less in the short term,” he added. “Put simply, there are currently more reasons to be bullish than bearish.”

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