Source: Wall Street News
The sledgehammer of the sixth round of EU sanctions against Russia has hit crude oil.
As soon as the news came out, the global crude oil market surged, with Brent oil breaking through the $120 mark, the highest level in nearly two months. And Brent is also expected to achieve a six-month rise in a row, becoming the longest upward cycle in more than a decade. In addition, the improvement of China’s epidemic situation and the stimulation of crude oil demand are also a key force to boost oil prices.
European Council President Charles Michel said on social media that the EU has reached a consensus on imposing an oil embargo on Russia, which “will immediately cover two-thirds of the EU’s oil imports from Russia”, aiming to cut off Russia’s huge energy revenue to exert pressure .
Among the ban measures, Germany and Poland pledged to stop oil imports through the northern Druzhba pipeline, which is expected to reach 90 percent by the end of this year. But until a technical solution is found to meet the energy needs of Hungary and other landlocked countries, Russia’s oil shipments from the Druzhba pipeline to Central Europe will be released.
Notably, EU oil imports through the Druzhba pipeline have increased since the Russian-Ukrainian conflict, with EU buyers seeking to stock up ahead of the embargo.
Energy price reporting agency Argus said that while seaborne exports of crude oil from Russia to Europe fell by 500,000 bpd, exports through the Druzhba pipeline in April were up 100,000 bpd from January and are now expected to be 50,000 bpd. Months will increase again.
Among them, Hungary’s imports rose by 65,000 bpd, while Poland’s imports increased by 130,000 bpd, which helped offset declines in other regions.
And if exports through the Druzhba pipeline can reach the maximum capacity cap of 750,000 barrels per day, it will help Russia earn about $2 billion a month from the EU.
The action, which also involves a ban on insurance for oil shipments to third countries, will come into effect six months from the date the sanctions package was passed (previously the proposed transition period was three months). However, some point out that this may be just an ineffective action, more to appease Germany’s mood.
Moreover, although the EU aims to impose a ban on Russia, some member states will adopt a transition period for the offshore oil ban . Among them, Bulgaria’s transition period is expected to be until June 2024 or December 2024, while Croatia is preparing to exempt imports of vacuum gas oil (used to produce products such as gasoline).
Separately, according to media reports, EU diplomats said the embargo would include oil and petroleum products.
This has caused the price of refined products such as diesel and gasoline to rise even more when the price of crude oil has soared. European light oil contracts, which reflect the price of products such as diesel, are now trading near record highs of $1,200 a tonne.
The partial crude oil ban could distort competition in the EU crude market, giving refiners importing Russian crude a huge price advantage.
Compared with Brent crude’s high of $120, Russia’s Urals crude is currently trading at just $93 a barrel. Hungarian oil group Mol said profit margins at its refineries had “surged” since March due to the “widening of the Brent-Ural crude spread”.
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