LONDON: Oil prices jumped on Wednesday as the European Union, the world's largest trading bloc, spelled out plans to phase out imports of Russian oil, offsetting demand worries in top importer China.
Brent crude futures rose $3.99, or 3.8%, to $108.96a barrel by 1121 GMT. West Texas Intermediate crudefutures rose $4.05, or 4%, to $106.46 a barrel.
European Commission President Ursula von der Leyen onWednesday proposed a phased oil embargo on Russia over its war in Ukraine, as well as sanctioning Russia's top bank, in a bid to deepen Moscow's isolation.
The Commission's measures include phasing out supplies ofRussian crude within six months and refined products byend-2022, von der Leyen said. She also pledged to minimise the impact on European economies.
Hungary and Slovakia, however, will be able to continuebuying Russian crude oil until the end of 2023 under existingcontracts, an EU source told Reuters on Wednesday.
"Russian oil is now 'bad oil'," SEB chief commoditiesanalyst Bjarne Schieldrop said.
EU set to unveil sanctions on Russian oil as fighting rages in Ukraine
"This energy war of 'good oil' versus 'bad oil' has juststarted," he added.
Investors are also waiting for an announcement from the U.S.Federal Reserve on Wednesday. It is expected to intensifyefforts to bring down high inflation by raising interest ratesand reducing its balance sheet.
In the United States, crude and fuel stocks fell last week,according to market sources citing American Petroleum Institute figures. Crude stocks fell by 3.5 million barrels for the week ended April 29, they said. This was more than an expected 800,000-barrel drop estimated in a Reuters poll.
U.S. government data on stocks is due on Wednesday.
Oil prices fell more than 2% on Tuesday on demand worriesstemming from China's prolonged COVID-19 lockdowns that have curtailed travel plans during the Labour Day holiday season.
The global manufacturing purchasing managers indexcontracted in April for the first time since June 2020, withChina's lockdowns a key contributor, Caroline Bain, chiefcommodities economist at Capital Economics said in a note.
The Organization of the Petroleum Exporting Countries andtheir allies on Thursday are expected to stick to their policyfor another monthly production increase.