Oil up as Germany considers greenlighting sanctions on Russian fossil fuels

By Sibel Morrow

ANKARA (AA) - Oil prices increased on Friday over supply fears after reports that Germany could consent to an embargo on Russian hydrocarbon products, while ongoing COVID-19 measures in China limited further increases.

International benchmark Brent crude cost $108.37 per barrel at 0710 GMT for a 1.03% increase after closing the previous session at $107.26 a barrel.

American benchmark West Texas Intermediate (WTI) traded at $106 per barrel at the same time for a 0.6% gain after the previous session closed at $105.36 a barrel.

Germany had opposed the ban on Russian oil and natural gas in light of the negative consequences for European economies and the lack of alternative supplies in the short term.

However, despite its position as a top importer of Russian fossil fuels, paying an estimated €9.1 billion, Germany vowed to gradually slash its coal imports by half by the end of autumn after cutting oil imports from June.

In retaliation for the numerous Western sanctions imposed on Russia, the country introduced a new payment system for gas imports requiring a bank account in Gazprombank where payments in euros or dollars would be converted to rubles.

Energy giant Gazprom halted its gas deliveries to Bulgaria and Poland on Wednesday due to their refusal to adopt this new payment system, inflaming the EU with a warning to Russia that it will not bend to “blackmail” over its support for Ukraine.

Meanwhile, fears over the economic impact of China's COVID-19 lockdowns and the rising value of the US dollar are putting crude prices, indexed to the US dollar, under pressure.

The dollar index, which measures the value of the American dollar against a basket of currencies, including the Japanese yen, British pound, Canadian dollar, Swedish krona, and Swiss franc, hit 103.67 on Thursday, rising more than 4.4% month on month.

Investors are now keeping tabs on the meeting of the OPEC+ group on May 5, when the group will discuss the latest market developments and decide how much oil to pump in June. The 23-member group is expected to maintain its modest rate of increasing output.