Crude oil prices remained bullish Tuesday morning after the latest signal from the European Union that it is preparing to impose an oil embargo on Russia. China Covid lockdowns continued to exert downward pressure on benchmarks, temporarily reversing the price rise, but the upside potential remains substantial, especially after BP’s CEO Bernard Looney told Reuters he expected the deficit of Russian oil to double from 1 million bpd to 2 million bpd this month.
Germany’s Economy Minister Robert Habeck said on Monday that Germany was ready to support an immediate oil embargo as well as a more gradual phase-out of Russian oil imports.
"Germany is not against an oil ban on Russia. Of course, it is a heavy load to bear but we would be ready to do that," Habeck said, as quoted by Reuters.
The official also admitted the EU will suffer consequences from its sanction action.
“It’s inconceivable that sanctions won’t have consequences for our own economy and for prices in our countries,” Habeck said, as quoted by the Financial Times. “We as Europeans are prepared to bear [the economic strain] in order to help Ukraine. But there’s no way this won’t come at a cost to us.”
Meanwhile, Brent crude topped $108 per barrel on Monday, retreating slightly on Tuesday morning to $106.7 (8:50am EST), but remaining substantially higher than a week ago. West Texas Intermediate was trading at $104.3 per barrel at the time of writing, after topping $105 on Monday.
In further bullish news, Reuters reported that five analysts it polled expected the American Petroleum Institute to report another decline in crude oil inventories, with the median forecast for a 1.2-million-barrel draw.
This would add to already substantial declines in crude oil and fuel inventories. In crude, inventories have shed a cumulative 421 million barrels since July last year. Whole fuel inventories across the board are palpably below the five-year average for this time of the year.
Meanwhile, the longer-term outlook for oil also remains bullish as Russia’s production is falling faster than expected and a lot of it may be lost irreversibly.
While this is happening, OPEC recorded almost no increase in production last month, with analysts expecting the cartel to report a modest 40,000-bpd monthly increase from March. This compares to some 250,000 bpd in monthly increases agreed by the OPEC+ members two years ago.
By Irina Slav for Oilprice.com
More Top Reads From Oilprice.com:
- Is It Fair To Blame Oil Companies For High Prices?
- The Global Energy Shortage Could Be A Boon For Tidal Power
- The U.S. Shale Patch Is Facing A Plethora Of Problems