The European Commission presents the embargo on Russian oil

Oil rallied on Wednesday: Brent futures traded on ICE edged +4.9% higher to $110.14/b and WTI futures traded on NYMEX gained +5.3% to settle at $107.81/b.

The bullish market was fueled by the presentation by the European Commission of its plan to ban the import of oil from Russia in six months and of refined products by the end of 2022. There is also the proposal to prohibit European companies to provide services to Russian energy industry (including insurers and shipping companies): this could strongly reduce the ability of Moscow to export oil. The plan now needs to be approved by all member states, Bulgaria, Hungary, Slovakia and Czech Republic raised concerns about its impact, but would likely benefit from an extended period to comply with the embargo. The deal could be validated as soon as today.

The EIA unexpectedly reported an increase (yet modest) of 1.3Mb in crude inventory. But the stocks of distillates and gasoline continued to fall as the US export these products to replace Russian supply: the stock of distillates decreased by 23% over one year.

On the agenda today OPEC+ members are meting and should decide to go forward with the modest output increase of 432kb/d in June.

This morning oil benchmarks are climbing by 0.5%.