- The ban on Russian oil imports adds to supply pressures amid high demand for fuel in Europe and the US.
- The economic risk to European countries grows with Russian oil sanctions.
- Oil is heading back to 120.00 in the charts as the bulls charge ahead.
Tuesday morning saw crude oil (CL) futures prices rise after the EU leaders’ summit, where they agreed to ban a large percentage of oil imports from Russia. This ban comes at a time when demand for fuel has increased due to the approaching peak US and European summer driving season.
EU leaders agreed to cut 90% of oil imports by the end of the year. This move is meant to put pressure on Russia to end the war as it will cut off a significant source of financing for the country’s war machine. The remaining 10% is to cater to countries like Hungary and Slovakia, which had held up the agreements as they could not easily replace their oil supply.
This ban will apply to Russian crude delivered by shipments. The economic risk for Europe grows with more oil sanctions on Russia as many countries depend on Russian crude. Today, leaders will be looking to help Ukraine sell its grain to the global market using rail and trucks as the Russian navy has blocked its sea routes.
Tina Teng, a market analyst at CMC Markets, said that prices could be heading back to March highs as the ban builds on supply tensions. Demand in China is also going up as it eases COVID-19 restrictions. People in Shanghai will be back on the roads starting tomorrow, and they will be using fuel.
On the production side, members of OPEC have maintained that the oil market is balanced and that the recent price hikes are not connected to fundamentals.
All the above fundamentals are pushing oil prices higher and burdening economies worldwide with rising inflation and higher living costs.
Crude oil (CL) futures technical forecast:
The 4-hour chart shows that the price has increased above the 113.00 level. The market also shows increased bullish momentum, as seen in the RSI, which is currently around 65. We might see the price reach 120.00 (psychological resistance) later in the day. The bias remains bullish as long as the price trades above the 30-SMA.