Oil soared to $110 mid-Wednesday as details on the European Union’s plans to ban Russia oil continue to be revealed and digested by the market.
Up 4.75% on the day as of 1:53 p.m. EST, just under $110 per barrel, oil prices are responding to additional details on European Union plans to embargo Russian oil, including through sanctions on insurance companies.
In one month, the European Commission proposes to ban all shipping, brokerage, insurance and financing servers related to the import and transport of Russian oil, Reuters cited an unnamed EU source as saying on Wednesday.
There is a global element to the proposed ban related to export of Russian oil in order to make it more difficult for Russia to seek out alternative buyers. However, shipping and financing, specifically, the proposed ban would only be put in place for European Union companies, Reuters reported.
This aspect of the proposed ban represents a severe measure, as some 95% of the world’s taker liability coverage goes through the London-based International Group of P&I Clubs, according to Bloomberg.
The market appears to be assessing the EU moves as far more serious than previous talk, with Bloomberg also noting the Iranian precedent, when the U.S. and the EU managed to stymie Iran’s oil exports by targeting insurance.
Oil is also responding to rumblings from a meeting earlier today of OPEC+ and the Joint Technical Committee (JTC), which signaled the likelihood that no further oil output increases beyond the previously discussed 423,000 bdp commitment for June would be forthcoming.
These issues are now outweighing fears of demand destruction coming out of China, where COVID lockdowns continue, with no concrete indications of easing in the immediate term.
By Charles Kennedy for Oilprice.com
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