London — Oil prices reversed course to trade in positive territory on Monday on fears supply might be crimped by a potential European Union ban on Russian crude.
Brent crude futures were up 7 cents, or 0.1%, to $107.21 a barrel at 12:32 p.m. EDT (1632 GMT), while U.S. West Texas Intermediate (WTI) crude futures rose 4 centsto $104.73 a barrel.
Both benchmarks fell by more than $2.00 earlier in the session on news the European Commission may spare Hungary and Slovakia from a Russian oil embargo as it prepares to finalize its next batch of sanctions on Russia on Tuesday.
“Attention has quickly shifted to expectations that a full embargo is unlikely to be seen for months and possibly by year’s end given a need for most countries to line up alternative supply sources,” said Jim Ritterbusch, president of Ritterbusch and Associates in Gallena, Illinois.
The EU is leaning towards banning Russian oil imports by the end of the year, according to two EU diplomats, after talks between the European Commission and EU member states over the weekend.
Around half of Russia’s 4.7 million barrels per day (bpd) of crude exports go to the EU, supplying about a quarter of the bloc’s oil imports in 2020.
While Western countries have refrained from buying Russian oil due to sanctions on those exports, the impact on global supply has been somewhat cushioned as India has been picking up heavily-discounted Russian cargoes.
On the demand side, U.S. factory activity grew at its slowest pace in nearly two years in April, according to a survey from the Institute for Supply Management (ISM) on Monday. However, the ISM’s index of national factory activity fell to a reading of 55.4 last month, which is still considered to be a mark of expansion.
“U.S. economic data still indicated expansion in the manufacturing sector, far from a recessionary number,” said Phil Flynn, market analyst at Price Futures Group in Chicago.
Markets in Japan, Britain, India and across Southeast Asia were closed for public holidays on Monday.
China released data on Saturday showing factory activity in the world’s second-largest economy contracted for a second straight month to its lowest level since February 2020 because of COVID lockdowns.
“A slowing to that extent, when China is already suffering from a property bust and worries about its (until recently) increased regulation, is potentially a major issue for commodity markets and the world economy,” Tobin Gorey, a Commonwealth Bank commodities analyst, said in a note.
On the supply side, Libya’s National Oil Corp (NOC) said on Sunday it would temporarily resume operations at the Zueitina oil terminal after it declared force majeure in late April on some shipments as political protesters forced a number of oil facilities to suspend operations.
*Laura Sanicola, Noah Browning & Sonali Paul; Editing: Bernadette Baum, Mark Potter, Emelia Sithole-Matarise & Paul Simao – Reuters
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