Oil prices steadied on Thursday, under pressure from a stronger dollar and a drop in global stock markets while supported by supply worries after the European Union (EU) laid out plans for new sanctions against Russia including an embargo on crude.

Brent futures rose 42 cents, or 0.4%, to $110.56 a barrel by 1754 GMT. US West Texas Intermediate (WTI) crude rose 3 cents to $107.84.

A strong dollar makes oil more expensive for holders of other currencies. Wall Street stocks tumbled as investors shed risky investments, worried the Fed might hike rates more this year to tame inflation.

The EU sanctions proposal, which needs unanimous backing from the 27 countries in the bloc, includes phasing out imports of Russian refined products by the end of 2022 and a ban on all shipping and insurance services for transporting Russian oil.

“The oil market has not fully priced in the potential of an EU oil embargo, so higher crude prices are to be expected in the summer months if it’s voted into law,” Rystad Energy Head of oil markets research Bjornar Tonhaugen said.

Japan said it would face difficulties in immediately cutting off Russian oil imports.

The Organisation of the Petroleum Exporting Countries, Russia and allied producers (OPEC+) agreed to another modest monthly oil output increase.

Ignoring calls from Western nations to hike output more, OPEC+ agreed to raise June production by 432,000 barrels per day, in line with its plan to unwind curbs made when the pandemic hammered demand.

UBS Strategist Giovanni Staunovo, cited “mobility restrictions in China weighing on oil demand, high Russian crude exports in April and dwindling spare capacity” in OPEC+.

A US Senate panel advanced a bill that could expose OPEC+ to lawsuits for collusion on boosting oil prices. Prices for near-term Brent and WTI oil futures are much more expensive than for future months, a situation known as backwardation.

Mizuho executive director of energy futures Robert Yawger, said futures for both benchmarks through April 2023 were in “super-backwardation” with each future month at least $1 a barrel below the prior month.

Yawger said that situation could change as the US government buys crude to replenish strategic crude reserves. 

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