Oil extends rally as EU proposes more sanctions on Russia

April 05, 2022: Oil prices jumped further Tuesday as the European Union proposed further sanctions against major crude producer Russia in response to killings in the Ukrainian town of Bucha that have prompted international condemnation.

Elsewhere, European and US stocks were mostly lower, while Asian equity markets rose. The dollar was mixed versus major rivals.

Oil rising again "is bad news for corporates looking to manage cost pressures, and for consumers already struggling to stomach higher energy bills", noted Russ Mould, investment director at AJ Bell.

While countries in Europe -- particularly Germany -- rely heavily on energy from Russia, the possibility of an oil embargo sent both main crude contracts sharply higher Monday.

In the end the EU didn't target oil, instead calling for sanctions on coal and shipping.

But Brent North Sea and WTI oil continued their rise on Tuesday, helping paring some of the sharp losses seen Friday in reaction to a pledge by Washington and other major economies to unleash millions of barrels from their stockpiles to keep a lid on prices, which are fanning already high inflation.

The additional EU sanctions came days after dozens of bodies were found on the streets in Bucha, northwest of Kyiv, though some countries remain worried of the potential economic fallout.

Ukrainian President Volodymyr Zelensky blames Russian troops for the killings, but the Kremlin has denied responsibility.

White House National Security Advisor Jake Sullivan signalled more US sanctions were on the way this week.

The US Treasury said Tuesday said that the United States will bar Russia from making debt payments using funds held at American banks, to ramp up the economic pain on Moscow.

Wall Street opened moderately lower after posting strong gains Monday despite continued uncertainty caused by the war in Ukraine.

But market analyst Patrick J. O'Hare at Briefing.com said investors were concerned that the rally by stocks off March lows won't last.

Investors "will be battling the idea that further upside will be harder to come by given an existing backdrop that includes rising interest rates, persistently high inflation pressures around the globe, and Russia's continued attack on Ukraine," he said.

Traders will be keeping a close eye on the release this week of minutes from the Federal Reserve's most recent policy meeting, hoping for an insight into officials' thinking over future monetary policy.

After the Fed's expected quarter-point interest rate hike last month, there are increasing bets on a half-point lift in May in light of soaring inflation and strong jobs data that suggest the US economy remains robust enough to absorb higher borrowing costs.

AFP/APP