Oil prices surged on Wednesday as markets were bullish about the recovery of fuel demand after China eased its COVID-19 restrictions, and investors also digested the impact from a Russian ban on sales to clients adhering to a Group of Seven price cap.
Brent crude was up 66 cents, or 0.8%, at $84.58 a barrel at early trading in Asia, while U.S. West Texas Intermediate crude settled 18 cents higher at $79.73 per barrel.
In response to the price cap imposed by the West on Russian oil, Moscow issued a decree on Tuesday banning oil sales to countries and firms who comply with the cap. The market was concerned that the move would seriously disrupt trade.
“The supply of Russian oil and oil products to foreign legal entities and individuals is prohibited if the contracts for these supplies directly or indirectly” are using a price cap, the presidential decree said. The ban will be in force from February 1 through July 1.
After a turbulent year that saw prices spike following Russia’s invasion of Ukraine and then gradually draw back as fears of a global downturn intensified, crude is on track for a modest gain in 2022. More recently, China’s sudden relaxation of its tight Covid Zero regulation has struck a market prone to strong swings due to a lack of liquidity.