May 05, 2022 02:50AM ET
By: AnalysisWatch
Oil prices extended gains on Thursday on supply concerns as the European Union unveiled plans for new sanctions against Russia, including an embargo on crude for six months, offsetting concerns about weaker Chinese demand.
By 02:38 AM ET, Brent crude futures climbed 85 cents, or 0.8%, to $110.99 a barrel, while U.S. West Texas Intermediate crude futures rose 65 cents, or 0.6%, to $108.46 a barrel.
Both benchmarks rose more than $1 a barrel during the volatile session, following gains of more than $5 a barrel on Wednesday.
The sanctions proposal announced by European Commission President Ursula von der Leyen, which must be unanimously approved by the 27 EU countries to take effect, calls for a halt to supplies of Russian crude oil within six months and refined products by the end of 2022.
It also proposes to ban within one month all shipping, brokerage, insurance, and financing services offered by EU companies for the transportation of Russian oil.
However, the EU faces the task of finding alternative sources of supply at a time when energy prices have skyrocketed. It imports about 3.5 million barrels of Russian oil and oil products daily and also depends on Moscow's gas supplies.
Some eastern EU countries are concerned that the proposal does not give them enough time to adjust.
The Organization of Petroleum Exporting Countries and allied producers, known as OPEC+, are expected to agree on Thursday to raise June production targets by 432,000 barrels per day (bpd), four OPEC+ delegates told Reuters. OPEC+ would thus stick to plans for a gradual increase in monthly production.
According to the Energy Information Administration, crude oil inventories rose by 1.2 million barrels last week after more oil was released from strategic reserves.