Holding On To Gains As EU Sanctions Meet Resistance, Chinese Data Points To Slowdowns

WTI and Brent are between $0.30 - $0.40 firmer at typing, a little below two-week highs made earlier in the session at $108.93 and $111.34 respectively.

• To recap, both benchmarks closed ~$5 higher apiece on Wednesday as the European Commission unveiled proposed sanctions on Russian crude, including measures targeting insurance and financing operations on its transportation. The proposal now likely enters a phase of negotiation as consensus amongst the bloc’s 27 members is required, with RTRS source reports pointing to debate re: conditional exemptions on the embargo for Hungary and Slovakia.
• Looking to China, worry re: reduced energy demand continues to be front and centre, with the Apr Caixin Services PMI slowing to 36.2 (vs. BBG median 40.0; Mar 42.0), the second-lowest on record since readings began in 2005. COVID cases in the country have continued to stay low at 5K cases nationwide, although Shanghai continues to see low double-digit cases “in the community” (outside of lockdowns).
• Elsewhere, U.S. EIA crude inventory data crossed on Wednesday, recording a surprise build in crude stockpiles (diverging from Tuesday’s reports of API estimates pointing to a decline) and an increase in Cushing hub stocks, while a smaller-than-expected drawdown in gasoline and distillate stocks was observed.
• OPEC+ is expected to meet later on Thursday to discuss production quota increases for June (expected to raise target by 432K bpd), although well-documented difficulties in increasing production amongst some members of the group i.e. Libya and Nigeria) likely remain front and centre for the space.