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Oil bounces on prospects of EU sanctions on Russian oil

Russian oil

Brent crude futures rose $1.46, or 1.4%, to $106.43 a barrel and West Texas Intermediate crude futures rose $1.59, or 1.6%, to $104.00 a barrel

Oil prices bounced on Wednesday ahead of an announcement by the U.S. Federal Reserve and further sanctions on Russia by the European Union, offsetting demand worries in top importer China.

Brent crude futures rose $1.46, or 1.4%, to $106.43 a barrel by 0616 GMT amid thin trading volume, with China and Japan closed for holidays. West Texas Intermediate crude futures rose $1.59, or 1.6%, to $104.00 a barrel.

The gains came on the back of news from Tuesday that the European Union would slap new sanctions on Russia for waging war on Ukraine.

European Commission President Ursula von der Leyen is expected to spell out the proposed new sanctions on Wednesday, including a ban on imports of Russian oil by the end of 2022, officials said.

Investors are also waiting for an announcement from the Fed on Wednesday. It is expected to intensify efforts to bring down high inflation by raising interest rates and reducing its balance sheet.

Oil prices remain in a holding pattern ahead of EU sanctions and the Fed, Stephen Innes of SPI Asset Management said in a note.

In the United States, crude and fuel stocks fell last week, according to market sources citing American Petroleum Institute figures. Crude stocks fell by 3.5 million barrels for the week ended April 29, they said.

U.S. government data on stocks is due on Wednesday.

Oil prices fell more than 2% on Tuesday on demand worries stemming from China’s prolonged COVID-19 lockdowns that have curtailed travel plans during the Labour Day holiday season.

The global manufacturing purchasing managers index contracted in April for the first time since June 2020, with China’s lockdowns a key contributor, Caroline Bain, chief commodities economist at Capital Economics said in a note.

The big picture is clearly negative for commodities demand, she said, adding that rising inflation and higher interest rates were starting to bear down on spending.

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