Crude oil rises as European Union plans to ban Russian oil imports

Highlights

• Crude oil prices rose on Tuesday.
• Both oil benchmarks settled nearly 7% higher on Monday as the potential for more supply disruptions weighed on the market.
• The weekend attack by Yemen’s Iran-aligned Houthi group caused a temporary drop in output at a Saudi Aramco refinery JV in Yanbu.

Crude oil prices extended their rally on Tuesday morning after climbing more than US$3/bbl on Monday. The significant rise in crude oil prices has been witnessed after the news that some European Union members are considering options to impose sanctions on Russian oil and as attacks on Saudi oil facilities sent fears through the market.

Both oil benchmarks settled nearly 7% higher on Monday as the potential for more supply disruptions weighed on the market. The prices moved higher ahead of talks this week between the US President Joe Biden and European Union governments in a series of summits that aim to harden the West's response to Moscow over its invasion of Ukraine.

Both oil benchmarks settled above US$109/bbl on Monday. WTI Crude Oil futures settled for US$109.97/bbl while Brent Crude Oil futures closed at US$115.62 on Monday.

Source: Refinitiv Eikon

On Tuesday, May delivery Brent Crude oil futures further declined and last traded at US$118.10 per barrel up 2.14%, while April delivery WTI crude oil futures exchanged hands at US$112.28 per barrel, up 2.28% at 2:52 PM AEDT.

Also Read: Crude oil surges to 14-year highs on delays in Iranian talks

European Union’s dilemma

Foreign ministers of the European Union are in dilemma whether to join the US in banning Russian oil or not, as some countries including Germany say that the alliance is highly dependent on Russian fossil fuels.

Must Watch: As Russia-Ukraine War Intensifies, Commodities Also Soars

Adding to this, the weekend attack by Yemen's Iran-aligned Houthi group caused a temporary drop in output at a Saudi Aramco refinery JV in Yanbu. Responding to the attacks, Saudi Arabia has warned that it would not take the responsibility for disruptions to the global oil supply following attacks on its oil facilities by Iranian-based Houthis.

Also Read: Crude oil slides from multi-year highs as Iran talks rev up

Furthermore, the latest report from the Organization of the Petroleum Exporting Countries (OPEC) along with its allies including Russia, together known as OPEC+, shows that some producers are still falling short of their agreed supply quotas, further raising the supply shortage concerns.

Besides, a fresh rise in COVID-19 cases in China has curtailed the demand, providing relaxation to skying crude oil prices.

Bottom Line

Crude oil prices rose on Tuesday after recording substantial gains on Monday as European Union plans to join hands with the US to impose sanctions on Russian oil imports. Crude oil prices have been volatile in the last few weeks amid rising supply and demand concerns ignited due to the Russia-Ukraine war and rising coronavirus cases in China.

Here’s how commodities performed in the last week click here