Oil falls, China closes cover European proposal to ban Russian crude
Oil prices fell more than 2 percent on Tuesday, as demand concerns from closures in China to contain the emerging COVID-19 virus covered a possible European ban on Russian crude.
Beijing is conducting a population test campaign to avoid closures, as Shanghai has seen over the past month.
Brent crude futures ended the trading session down $2.61, or 2.4%, at $104.97 per barrel.Benchmark West Texas Intermediate crude contracts closed down $2.76, or 2.6%, to $102.41 a barrel.
"There are real concerns about whether Chinese demand, which is a huge factor in global demand, will remain strong in 2022," said Gary Cunningham, trading director at Trading Engineering.
"Price movements are likely to remain volatile as investors examine the impact of closures in China in exchange for oil sanctions the EU plans to impose on Russia ahead of Wednesdays US Federal Reserve meeting," said Phil Flynn, an analyst at Price Futures Group.
The market is also awaiting the latest round of U.S. Inventory and oil supply reports.Five analysts polled by Reuters predicted that U.S. Crude inventories fell 1.2 million barrels last week.
The American Petroleum Institute will release its inventory report later today, followed by government figures from the U.S. Energy Information Administration, on Wednesday.
The EU's foreign policy chief, Josep Burrell, said earlier Tuesday that the EU was preparing new sanctions against Russia targeting the oil sector and more banks and those responsible for misinformation.
"We are working on the sixth package of sanctions aimed at isolating more banks from swift's (international financial payments) system, listing those responsible for misinformation, as well as dealing with (Russian) oil imports," Burrell said on Twitter.
He noted that the European Commission's proposed actions against Russia would be submitted to the bloc's 27 member states for approval.
"European Commission President Ursula von der Leyen is expected to set out the proposed sanctions on Wednesday, which will include a ban on Russian oil imports by the end of this year," officials said.
Russian President Vladimir Putin on Tuesday told the West that he could stop exports and fail to meet agreements in response to the burden of sanctions imposed by the European Union and the United States.
A ban on Russian oil would deprive Moscow of a large revenue stream, but an attempt to reach agreement on the measure has divided EU countries that depend on Russia for 26 percent of their oil imports.
Hungary and Germany are among those with reservations about the oil embargo, and one of their concerns was that rising energy prices would hurt EU economies already facing inflationary difficulties.
Diplomats told Reuters that resistance to the oil import ban has begun to weaken in recent days after an agreement was reached to exempt Slovakia and Hungary, which rely heavily on Russian crude.
EU countries have paid More than 47 billion euros ($47.43 billion) to Russia for gas and oil since the invasion of Ukraine on February 24, according to the Center for Energy and Clean Air Research.
