Topline
Global crude oil prices rose on Tuesday after the European Union unveiled its latest set of sanctions against Russia, which include an immediate ban on two-thirds of all Russian oil imports by the bloc’s member nations, in response to its invasion of neighbor Ukraine.
An employee loads an oil transport truck in the Duna oil refinery, in Szazhalombatta, Hungary.
Key Facts
The global Brent crude futures for July was up 1.91% to $124 per barrel, the highest it has been since March.
The July contract is set to expire on Tuesday and the global benchmark contract for August was also up 1.9%, closing in on $120 per barrel.
The West Texas Intermediate futures witnessed a steeper climb of 3.56% to more than $119 per barrel.
According to Reuters, both the global and U.S. benchmarks will end May by reporting rising crude oil prices for a sixth consecutive month.
Oil prices are further likely being buoyed by China’s decision to reopen its financial capital Shanghai after a two-month-long Covid-19 lockdown, Reuters adds.
The embargo appears to have had an impact on U.S. stock markets as both the S&P 500 and Dow Index opened 0.9% and 1.2% down respectively on Tuesday morning.
What To Watch For
Russian state-owned energy major Gazprom responded with the suspension of gas supplies to the Netherlands and threatened to do the same against Denmark. Leaders of some EU member nations have warned that the Russian oil ban will cause some economic pain but substituting Russian gas may be an even harder challenge. By shutting gas supplies to the Netherlands, Finland, Poland, and Bulgaria, Moscow has shown that it is willing to suffer economic pain to disrupt energy supplies to Europe. A suspension of Russian gas supplies to Denmark and other western European states could lead to further volatility in energy prices.
Key Background
Late on Monday, the European Union announced a sixth sanctions package against Russia pledging to ban “almost 90%” of all Russian oil imports by year-end along with an immediate ban on two-thirds of such imports. The ban, however, is only partial as it carves out special exemptions for Hungary—which had strongly opposed the ban—Slovakia and the Czech Republic. Russia has dismissed the move stating that it will find “other importers” for its oil.
Further Reading
We Will Find Other Importers: Russia Reacts To EU’s Partial Oil Ban (Forbes)
Oil Prices Gain as EU Commits to Partial Russian Crude Ban (Wall Street Journal)
Source: https://www.forbes.com/sites/siladityaray/2022/05/31/oil-prices-rise-after-eu-announces-partial-ban-on-russian-imports/