- The crude oil futures trades higher as the supply side faces several hindrances.
- EU’s embargo on Russian oil may result in higher crude oil prices.
- OPEC+ favors the limited price hike after the EU’s ban.
The price of crude oil futures (CL) traded higher due to supply-side factors, such as the Organization of the Petroleum Exporting Countries and its allies (OPEC+) and the European Union’s plans to impose an oil import ban.
Since early March, crude oil has exhibited consecutive random gains on the characteristics of a tightening market. This is because the European Union decided to bar supplies from Russia, and the United States announced the completion of its strategic reserves.
Oil prices for West Texas Intermediate are up 5% to $110 per barrel. By the end of the year, the EU plans to phase out its oil imports from Russia to punish Moscow for the invasion of Ukraine. However, according to the group, the ban should be revisited, giving Slovakia an extra year of consumption, granted on Friday.
EU’s embargo on Russian oil
According to three EU sources quoted by Reuters on Friday, the European Commission voted to impose an embargo on Russian oil to quell dissent.
A meeting of EU officials took place Friday morning, during which they discussed a simplified offer regarding the embargo and their own oil history, according to sources.
There is also a three-month transition period before shipping authorities are notified. After that, all are protected on an anonymous basis.
OPEC+ supporting price hike
Also supporting prices were OPEC+, which approved a limited price hike following the union’s ban on Russian imports. In addition, a production increase of 432,000 BPD is expected from OPEC and its allies for June.
However, OPEC increased production by only 10,000 barrels per day in the first case. As a result, according to OPEC, global oil demand will rise by 3.67 million barrels per day in 2022, 480,000 barrels less than previously forecast.
As reasons for the overhaul, the group cited the aftermath of the Russian invasion of Ukraine, increased dependence on oil, and the resurgence of China’s Omicron adaptation.
In the meantime, crude oil prices rose as quickly as gas consumption prices, reaching a session high of 8,169 per million British thermal units (MMBtu), the highest level since September 2008.
Crude oil futures (CL) technical analysis:
The 4-hour crude oil futures chart indicates a bullish scenario as the price remains supported by the $108.00 support level. However, CL may face strong resistance around the May 05 highs at around $111.37.
The 100-SMA and 200-SMA are going to create a bullish crossover. It is another sign of potential upside movement. The price is also well above the 20-SMA, indicating that the bulls maintain dominance.