Oil Updates — Crude climbs; EU, Hungary split over Russian embargo; Malaysia’s Kimanis crude exports to fall in July

RIYADH: Oil prices extended gains on Wednesday on hopes of demand recovery in China as the country gradually eases some of its strict COVID-19 containment measures.

Brent crude futures were up 48 cents, or 0.4 percent, at $112.41 a barrel at 0410 GMT, while US West Texas Intermediate crude futures climbed 93 cents, or 0.8 percent, to $113.33 a barrel, paring some losses after oil prices fell by around 2 percent in the previous session.

EU, Hungary split over Russian oil embargo

The EU and Hungary are negotiating financial support for Budapest so that it lifts its veto on the bloc’s planned embargo on Russian oil, but they remain split over funds for refineries, sources told Reuters on Tuesday.

The EU commission this month proposed a new package of sanctions against Russia for its invasion of Ukraine, which would include a total ban on oil imports in six months’ time, but the measures have not yet been adopted, with Hungary being among the most vocal critics of the plan. 

Hungary’s Foreign Minister Peter Szijjarto said on Monday that the total cost for Hungary to wean itself off Russian energy would be up to 18 billion euros ($19 billion).

But in talks with the EU, Budapest has indicated that a much smaller figure could be enough in the short-term to address its concerns.

It has demanded about 750 million euros to be invested in expanding an oil pipeline that connects the country to Croatia, and to convert refineries that run on Russian oil to different types of crude, Szijjarto and sources said.

Of these funds, up to 550 million euros would be needed to upgrade two refineries run by Hungarian energy group MOL in Hungary and Slovakia which can currently only process Russian oil.

MOL had said the cost for the upgrade will be between $500 million and $700 million.

The EU has repeatedly shown its backing to the expansion of the Croatian pipeline, but is dithering about offering Hungary full support to convert private refineries, as that could be an unfair aid in breach of the bloc’s competition rules, one official familiar with the talks told Reuters, adding that talks were underway about how much could be offered.

The official also said that Hungary’s alternative request to fully exempt piped oil from sanctions against Russia was “a complete no go.” Hungary receives 65 percent of its oil from a Russian pipeline.

Malaysia’s Kimanis crude exports to fall in July

Exports of Malaysia’s flagship Kimanis crude will fall in July following outages at two offshore oil fields that produce the oil, according to a source familiar with the matter and a preliminary loading program.

There will be six Kimanis crude cargoes loading in July, including one cargo rolled over from the previous month, the program showed.

(With input from Reuters)