Oil prices tumble to five-week low

·2 min read
Oil prices have extended their biggest drop in five weeks. Photo: Reuters
Oil prices have extended their biggest drop in five weeks. Photo: Reuters

Oil prices have extended their biggest drop in five weeks as European Union sanctions, recession fears, and demand concerns amid coronavirus lockdowns in the world's biggest importer China weigh.

The EU softened its proposals for a ban on Russian imports.

On Tuesday, European Commission (EC) president Ursula von der Leyen said the bloc had made some progress in talks over its proposed ban on Russian crude imports, but warned further work was needed.

The bloc is poised to drop a proposed ban on ships carrying Russian crude following objections from member states including Greece.

It is also planning to give Hungary, Slovakia and the Czech Republic more time to comply with sanctions on imports.

Last week, the EC proposed a phased embargo on Russian oil. The proposal needs an unanimous vote by EU member states this week to pass.

Read more: FTSE rises after global equities suffer worst fall since 2020

It came as oil imports by China in the first four months of this year fell 4.8% from a year ago, but April imports were up almost 7%.

Crude prices finished Monday down by over 6.5%. Brent crude (BZ=F) was trading 2.1% lower to $103.7o a barrel on Tuesday. US light crude (CL=F) fell 1.5% to $101.52 at the time of writing.

Meanwhile, Japan became the latest in the G7 to ban imports of Russian oil. While the move could take some time to implement, prime minister Fumio Kishida said it was an "extremely difficult" decision, but that G7 unity was important. Japan imported 3.6% of its crude oil from Russia in March.

On Sunday, Saudi Arabia, the world's top oil exporter, announced it would lower crude prices for Asia and Europe for June. The country had raised prices for all regions in May, with prices for Asia hitting all-time highs, as fears of disruption in Russian crude and gas supplies caused jitters in international energy markets.

Read more: Bitcoin drops 50% from November peak

The decline in crude prices follows the wider sell-off that's hitting equity markets and cyrptoassets including the world's biggest cryptocurrency bitcoin (BTC-USD), which dropped below $30,000 on Monday for the first time since July last year.

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