Oil hovers above $100 as EU prepares new Russia sanctions

Oil prices continue to hover above $100 a barrel as the EU prepares to impose phased sanctions on Russian crude, potentially squeezing supply in global markets.

Demand concerns, due to strict movement curbs in China to contain the spread of the Covid-19 pandemic, are also adding to the volatility in oil prices.

Brent, the global benchmark for two thirds of the world’s oil, was down 1.82 per cent at $105.62 a barrel at 8.42pm UAE time yesterday. West Texas Intermediate, the gauge that tracks US crude, was also trading 1.88 per cent lower at $103.19 a barrel.

“Oil prices continue to trade above the critical price level of $100 as traders are keeping a close eye on the EU, which is likely to ban Russian crude. If the embargo is placed on Russian oil, we do [expect] oil prices to pick up more volatility,” said Naeem Aslam, chief market analyst at Avatrade.

The EU is seeking to impose a phased ban on energy imports from Russia as Moscow continues its military offensive in Ukraine.

The bloc is expected to imminently announce its plans to tighten sanctions on Russia, potentially including a ban on the import of Russian oil by the end of the year. Moscow halted natural gas supplies to Poland and Bulgaria last week.

On Monday, Austria joined Germany in saying it could live with an embargo on Russian oil, which it had previously opposed.

“Traders are expecting this embargo to take place as the German finance minister has also backed this idea, which is quite a big change in the country’s stance against Russia,” said Mr Aslam.

Meanwhile, Hungary hinted on Monday that it was not yet willing to support an embargo on Russian exports.

“Crude prices declined after reports that Hungary vetoed the EU’s proposed ban on Russian energy,” said Edward Moya, a senior market analyst at Oanda.

“The growing risk of an embargo on Russian [oil] seems less likely until the EU can secure additional energy supplies for Hungary. Hungary can’t function without Russian energy and the EU will need to win their support in delivering harder-hitting sanctions against the Kremlin.”