Oil steady before OPEC+ meet later today, EU talks of Russia ban

Oil pumping jacks, also known as "nodding donkeys", operate in an oilfield near Neftekamsk, in the Republic of Bashkortostan, Russia, on Thursday, Nov. 19, 2020. The flaring coronavirus outbreak will be a key issue for OPEC+ when it meets at the end of the month to decide on whether to delay a planned easing of cuts early next year. Photographer: Andrey Rudakov/Bloomberg

Oil steadied ahead of an OPEC+ meeting on supply after jumping the most in three weeks as the European Union said it would implement a phased ban on Russian crude.

West Texas Intermediate traded near $108 a barrel after closing up 5.3% on Wednesday. The EU plans to ban Russian oil over the next six months and refined fuels by the end of the year, to increase pressure on Vladimir Putin over his invasion of Ukraine. The bloc is also targeting insurers in a move that could dramatically impair Moscow’s ability to ship its oil around the world.

U.S. inventory data, meanwhile, showed declines in nationwide holdings of gasoline and distillates. Stockpiles of diesel on the East Coast slumped to the lowest on record last week as local refiners rushed to supply global markets, suggesting a potential shortage of the industrial, transport and heating fuel.

Oil has surged more than 40% this year as Russia’s invasion of Ukraine disrupted flows, fanning inflation and prompting central banks including the U.S. Federal Reserve to tighten policy. At the same time, the Organization of Petroleum Exporting Countries and allies including Russia have been restoring supplies that were shuttered during the pandemic at only a restrained pace.

OPEC+ will likely ratify another small production increase when members gather later Thursday, with the threat to demand in China from anti-virus lockdowns offering another reason for caution. Still, there are signs that a lack of capacity is hobbling the group’s ability to deliver even modest increases.

The EU aims to conclude the sanctions package by the end of the week, or May 9 at the latest, according to diplomats. To get the curbs over the line, the bloc needs to address concerns from Hungary and Slovakia on phase-out timing, and queries from Greece on banning transport of oil between third countries.

Oil markets remain in backwardation, a bullish pattern marked by near-term prices trading above longer-dated ones. Among key differentials, the spread between Brent’s two nearest December contracts was well above $13 a barrel on Thursday, more than triple the gap at the start of the year.