The EU embargo on Russian oil is a big story this morning. Members of the European Union have finally come to an agreement on the shape of the embargo. The EU decided on a ban on Russian seaborne crude imports that account for around two-thirds of total EU imports of Russian oil. An exemption was made for pipeline oil imports in order to overcome Hungary’s opposition. A ban on seaborne crude oil imports from Russia will come into effect within six months while a ban on seaborne oil-derivative product imports will come into effect within eight months. While pipeline flows through a major Druzhba pipeline were exempted from sanctions, Poland and Germany – the main recipients – vowed to reduce their imports of Russian crude to zero. This means that there is a chance that the European Union will reduce total imports of Russian oil and oil-derivatives by 90% by the end of the year.
However, while details of the agreement remain scarce for now, it is said that the EU went beyond banning its own purchases of Russian oil. Namely, the EU also agreed to ban providing insurance for Russian seaborne crude imports to third countries. Given that some of the biggest global insurance companies are Western companies, this means that Russia may struggle to find an insurer willing to offer protection for its seaborne exports.
News triggered another wave of buying on the oil market. While embargo is a big thing, negotiations have been ongoing for some time and markets were expecting it to be implemented sooner or later. As such, no major spike in crude prices can be spotted today but rather a steady continuation of the previous upward move. Taking a look at OIL.WTI chart at H4 interval, we can see that the price continues to move higher following a break above the price zone marked with 61.8% retracement. Today’s upward move has pushed the price to the upper limit of the upward channel. The first attempt of breaking above this hurdle was a failed one and bulls lost some steam afterwards. Nevertheless, OIL.WTI continues to trade 1.4% higher on the day.