Commodities Outlook: Oil and Natural Gas Recovery on EU Sanctions Proposal


EU proposes second round of sanctions against Russian oil

Oil prices received another short-term boost ahead of new European Union (EU) sanctions.

The EU’s European Commission (EC) executive is seeking to phase out its energy dependence on Russia, on the back of ongoing war crimes against Ukraine.

Last month the EU announced sanctions on Russian coal imports and this month the region presented a proposal to restrict imports of Russian oil. The EC proposal suggests phasing out oil imports from Russia over a six-month period and refined crude products by the end of the year.

Russian crude imports have historically represented around 25% of those consumed by the EU.

Exemptions requested by EU countries

Slovakia and Hungary may only have to phase out their dependency by the end of 2023 if the proposal is accepted. However, it seems unlikely that these two countries will support the proposal.

Germany, Europe’s largest economy, recently backed the idea of ​​new oil sanctions in the region.

Sanction proposal goes beyond just oil

Included in the proposal to ban imports of Russian oil, the EU suggests removing three major banks, including Sberbank, from the international payment system “Swift”. Sberbank is Russia’s largest commercial bank. The move would seek to further cripple the nation financially.

The proposal also envisages banning three Russian public broadcasters.

EU also discusses natural gas imports

Natural gas imports from Russia have historically accounted for around 40% of EU gas purchases.

The high level of dependence on gas imports precludes the prospect of an immediate embargo, although another gradual sanction approach in the future could be the next commodities game targeted by the EU.

EU members are reportedly currently discussing the prospect of banning the energy source used primarily for electricity and heating.

Brent crude – technical view

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