European Agreement on Import Ban from Russia Raises Oil Prices

Oil prices have risen to $124, driven by the EU’s agreement to ban the import of Russian oil by ship and the announcement of the lifting of pandemic restrictions in Shanghai, China’s industrial and trading hub.

On the London market, the price of a barrel in contracts for July delivery rose by $2.11 compared to the previous close, to $123.78. In contracts for August delivery, it increased by $1.57, to $119.17.

On the American market, barrels were traded at a price $3.46 higher, at $118.53.

Traders today focused on the agreement among EU leaders to ban the import of Russian oil by ship, which accounts for 90% of total imports. This is the harshest sanction the Union has imposed on Moscow since the beginning of the Russian invasion of Ukraine in late February.

The import of crude oil will gradually decrease over six months, while the import of derivatives will decrease over eight months. The ban will not include oil transported via pipelines, as a concession to Hungary.

– Since two-thirds of Russian crude oil exports are delivered by sea, the EU will need to find a replacement for about 1.5 million barrels of oil per day – explains PVM analyst Tamas Varga.

– The amount is actually closer to 2.1 to 2.2 million barrels per day, as Poland and Germany plan to stop purchasing oil from pipelines by the end of the year – added Varga.

Support for prices was also provided by Shanghai’s announcement that it will allow citizens to leave their homes and use cars starting Wednesday.

Producers gathered in the Organization of the Petroleum Exporting Countries (OPEC) and their allies are also preparing to increase supply by only 432,000 barrels per day in July, as in previous months, six sources from OPEC+ said.

In a separate report, OPEC announced today that the price of a barrel of its members’ oil basket was $120.01 on Monday, which means it increased by $1.17 compared to the previous working day.