Oil prolongs crisis as Europe softens Russian sanctions proposals

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© Photographer: Daniel Acker/Bloom
Oil storage tanks in Cushing, Oklahoma. Photographer: Daniel Acker/Bloomberg

Oil extended its steepest decline in more than five weeks after the European Union eased its proposed sanctions on Russian crude exports and concerns over economic growth weighed on sentiment.

West Texas Intermediate futures fell below $102 a barrel in Asian trading after falling about 6% on Monday. The bloc will drop a proposal to ban EU-owned vessels carrying Russian crude after objections from members including Greece. Talks on a sixth sanctions package continue.

Central banks have tightened monetary policy to contain inflation that has been stoked by Russia’s war in Ukraine, and investors will watch the U.S. consumer price index for April closely on Wednesday. The Bloomberg Commodity Spot Index – which tracks 23 energy, metals and crop futures – fell 4.3% on Monday, the biggest drop since early March.

The oil market has been gripped by a period of trading volatility since Russia invaded Ukraine in late February. The US and UK have already moved to ban oil imports from the OPEC+ producer, while the EU seeks to overcome objections to similar moves from Hungary. Some progress has been made, the Hungarian foreign minister said after recent talks.

“Oil has not been able to escape the broader shift in risk aversion that we’ve seen across all markets,” said Warren Patterson, head of commodities strategy for ING Groep, based in London. Singapore. “The Hungarian opposition suggests that we could see further easing of the proposed sanctions.”

Prices

  • WTI for June delivery fell 1.3% to $101.80 a barrel on the New York Mercantile Exchange at 12:02 p.m. in Singapore. Futures fell 6.1% on Monday.
  • Brent for July settlement fell 1.3% to $104.61 a barrel on the ICE Futures Europe exchange after falling 5.7% on Monday.

A stubborn resurgence of Covid-19 in China has further added to the volatility. Virus lockdowns have strained the economy, while Chinese Premier Li Keqiang warned of a ‘complicated and serious’ employment situation as Beijing and Shanghai tightened restrictions in a bid to contain The epidemics.

Brent remains in a bullish backwardation pattern, where contracts close to the date are more expensive than later contracts. The fast time frame for the benchmark was $1.37 backward, down from $1.24 a week ago.

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