Crude oil futures extend gains as EU mulls Russian energy ban

Crude oil futures were higher in mid-morning Asian trade April 5, extending strong overnight gains as markets continued to price in the possibility of an EU-wide ban on Russian energy imports.

At 10:20 am Singapore time (0220 GMT), the ICE June Brent futures contract was up $1.82/b (1.69%) from the previous close at $109.35/b, while the NYMEX May light sweet crude contract rose $1.74/b (1.68%) to $105.02/b.

French President Emmanuel Macron on April 4 called for new sanctions that target Russian crude oil and coal -- although Austria is already opposing Russian energy sanctions -- and US President Joe Biden proposed a war crimes trial over the alleged atrocities, specifically referring to Russian President Vladimir Putin as a "war criminal."

Russia has denied committing any war crimes.

Biden also said the White House is working on additional sanctions against Russia.

The reports saw both crude benchmarks surging overnight to settle higher on the day by 3-4%.

Any outright ban by the EU on Russian energy imports is likely to send global trade flows into disarray. Russian gas accounted for around 45% of EU gas imports and close to 40% of its total gas consumption in 2021, while about 2.7 million b/d of Russian crude were exported to the EU, or around a quarter of total EU imports, before the invasion of Ukraine.

Although there are no official EU-level sanctions in place for buying and using Russian oil, about 2 million b/d of Russian crude and 700,000 b/d of its oil product exports have already been disrupted as a result of refiners and traders "self-sanctioning," according to S&P Global Commodity Insights.

"Plans for further sanctions on Russia suggest that geopolitical tensions may be here to stay, which renewed fears of a more prolonged oil supply disruption," said IG market strategist Yeap Jun Rong in a April 5 note.

"Oil prices for May were also raised by Saudi Arabia for all customers in regions including Asia, reflecting a tight oil market as Russian crude remains shunned by buyers," he added.

Saudi Aramco raised official selling prices across the board for May-loading cargoes, with Asia-bound barrels seeing the largest increases, between $2.70/b and $4.40/b, according to a pricing document Aramco released April 4.

Aramco had been expected to raise official selling prices for May-loading crude by a record of about $4/b-$5/b on the back of volatility the Russia-Ukraine war spurred, sources told S&P Global ahead of the announcement.

Dubai crude swaps and intermonth spreads were higher in mid-morning trade in Asia April 5 from the previous close.

The June Dubai swap was pegged at $101.56/b at 10 am Singapore time (0200 GMT), up $3.86/b (3.95%) from the April 4 Asian market close.

The May-June Dubai swap intermonth spread was pegged at $1.57/b at 10 am, up 11 cents/b over the same period, and the June-July intermonth spread was pegged at $1.11/b, up 19 cents/b.

The June Brent/Dubai EFS was pegged at $7.67/b, up 50 cents/b.