Oil prices rise after EU leaders agree to ban most Russian crude oil imports

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EU leaders reached an agreement to ban 90% of Russia’s crude oil by the end of 2022.

Joe Klamar | Afp | Getty Images

Oil prices skyrocketed after EU leaders reached an agreement late Monday to ban 90% of Russia’s crude oil by the end of the year.

During Asia hours on Tuesday, US crude oil futures for July were up 2.81% to $118.29, while Brent crude futures rose 0.93% to $122.80. August contracts also traded higher: US crude rose 2.84% to $115.42 and Brent rose 1.17% to $118.98 a barrel.

The agreement resolves a deadlock after Hungary initially held up talks. Hungary is a major user of Russian oil and its leader, Viktor Orban, is friends with Russia’s Vladimir Putin.

Charles Michel, president of the European Council, said the move would affect 75 percent of Russia’s oil imports.

The embargo is part of the European Union’s sixth sanctions package against Russia since it invaded Ukraine. Talks have been underway since early this month to impose an oil embargo.

“The European Council agrees that the sixth package of sanctions against Russia will cover both crude oil and petroleum products delivered to Member States from Russia, with a temporary exception for crude oil delivered by pipeline,” a statement said. of 31 May of the European Council.

The European Council added that in case of “sudden interruptions” of supply, “emergency measures” will be taken to ensure security of supply.

That temporary exception applies to the remaining Russian oil that has not yet been banned, European Commission president Ursula von der Leyen said at a news conference.

“We have agreed that somehow the Council will come back to the subject as soon as possible. So this is an issue that we will come back to and which we will have to work on, but this is a big step forward, which we have today have done,” she said, referring to the temporary exemption.

Von der Leyen explained that the temporary exemption has been granted so that Hungary, along with Slovakia and the Czech Republic – all connected to the southern part of the pipeline – have access that they cannot easily replace.

About 36% of the EU’s oil imports come from Russia, a country that plays an excessive role in global oil markets.

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The ban could heighten concerns about an already tight energy market. Energy prices have soared over the past year, contributing to a heated inflationary environment in many countries.

“Although pipeline imports were not included in this agreement, an embargo on oil imports by sea is still significant, accounting for about two-thirds of EU oil imports from Russia,” said Vivek Dhar, research director into mining and energy commodities at the Commonwealth Bank of Australia, wrote in a note following the news.

“A further ban on Russian crude supplied by shipments will put pressure on already depressed supply amid rising demand due to the start of the driving season in [the] United States,” wrote Avtar Sandu, senior manager of commodities at Philip Nova trading platform.

Meanwhile, OPEC+ is expected to stick to its original plan of a modest increase of 432,000 barrels per day for July, Sandu added.

— Natasha Turak of CNBC contributed to this report.



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