Tuesday, May 21, 2024
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Oil extends rally as EU considers more Russia sanctions

LONDON (AFP) – Oil prices jumped further yesterday as the European Union (EU) considered 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 Asian stock markets diverged and the dollar dipped 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 Investment Director at AJ Bell Russ Mould.

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 on Monday.

Brent North Sea and WTI oil continued their rise yesterday, each putting on more than 1.5 per cent. That pared some of the sharp losses seen on 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.

A currency trader walks by the screens showing the Korean Securities Dealers Automated Quotations (KOSDAQ) and the foreign exchange rate between the US dollar and South Korean won at a foreign exchange dealing room in Seoul, South Korea yesterday. PHOTO: AP

The EU is considering hitting Russia with sanctions on oil or coal, a top official said yesterday, 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 Zelenskyy blames Russian troops for the killings, but the Kremlin has denied responsibility.

White House National Security Advisor Jake Sullivan signalled more United States (US) sanctions were on the way this week. The continued uncertainty caused by the war in Ukraine, and blow to the global economy it is expected to deal, was unable to prevent another healthy performance on Monday on Wall Street. “Despite all the concerns, equities remain the best bet to achieve returns above today’s elevated inflation,” said markets strategist Louis Navellier.

Equities trading was tepid in Asia yesterday, with Hong Kong, Shanghai and Taipei closed for holidays. Tokyo’s blue-chip shares ended higher, driven by buying of high-tech shares, though the yen’s gyrations weighed on the market.

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 enough to absorb higher borrowing costs.