Crude oil prices retested its two-month high at $116 on Tuesday during the Asian session. The European Union imposed an embargo on Russian oil imports into Europe, marking the sixth global sanction placed on Russia for attacking Ukraine. On Monday, the European Council President - Charles Michael- made known recent developments. He tweeted from the European leaders' summit meeting in Brussels that the EU has finally agreed to ban Russian oil imports. This ban, according to him, "immediately covers more than 2/3 of oil imports from Russia". He described the purpose for this as "cutting a huge source of financing for its war machine."
The EU leaders look forward to cutting off 90% of oil imports from Russia before this year, with exemptions made for Hungary. This landlocked country depends heavily on crude oil from Russia and a few other countries.
This decision is undoubtedly set to create more scarcity of crude oil in the coming months. Russia is today known as the third global oil dealer, supplying over 40% of the total oil used in Europe daily.
The market bulls reacted by pushing crude oil prices to a new ATH at $116.7 during the Asian session today.
What are the major crude oil price factors?
Supply and Demand
Like every other commodity, crude oil trading is subjected to the principles of supply and demand. When the suppliers are limited, there is likely to be high demand leading to high prices. This is undoubtedly the immediate impact to expect in the market this month following the embargo placed on Russia by the EU. Thus, we might see oil prices revisit their ATH at $121 and even exceed it.
Improved economic engagements can drive up the demand for crude oil just as slowdowns tend to lower demand and prices. Thus the easing of the lockdown in China and the return to economic activities have created more demand for crude oil. And with the supply getting limited when there are high global demands, we can expect Crude oil prices to skyrocket in the coming months.