Oil prices surged after EU leaders agreed to restrict most Russian crude imports

June 01, 2022: -On Monday, oil prices surged after EU leaders finally agreed to restrict 90% of Russian crude by the year-end.

On Tuesday, U.S. crude futures for July increased up to 3% at $118.48 for each barrel, while Brent crude futures increased 1.73% to $123.78. At one point, U.S. crude climbed to $119.42 per barrel, a 12-week high, Refinitiv data showed.

Contracts for August pledged more elevated, WTI crude flinched 3.66% to $116.34, and Brent was up about 2% to $119.96 for every barrel.

The agreement resolves a deadlock after Hungary initially held up talks. Hungary is a significant user of Russian oil, and its leader, Viktor Orban, has been on friendly terms with Vladimir Putin.

The President of the European Council, Charles Michal said that this step would directly come up to 75% of Russian oil imports.

The embargo is part of the European Union’s sixth sanctions package on Russia since it intruded into Ukraine. Since the start of the month, talks about imposing an oil embargo have been underway.

“The European Council is agreeing that the sixth package of sanctions against Russia will cover crude oil and petroleum products, delivered from Russia into the Member States, with a brief exception for crude oil delivered by pipeline,” according to a statement from the European Council on May 31.

The European Council further said that in case of “sudden interruptions” of supply, “emergency measures” will be presented to ensure the security of supply.

That temporary exception covers the remaining Russian oil not yet banned, European Commission President Ursula von der Leyen said in a press conference.

“We have agreed that the Council will come back to the topic as soon as possible in any of the ways. So this is a topic where we will come back to and where we will still have to work on, but this is a big step forward, what we did today,” she said, regarding the temporary exemption.

Von der Leyen described that the temporary exemption was granted so that Hungary, Slovakia, and the Czech Republic, all connected to the pipeline’s southern leg, have access that they cannot easily replace.

Approximately 36% of the EU’s oil imports come from Russia, playing an outsized role in global oil markets.

The ban could exacerbate worries over an already-tight energy market. Energy prices have zoomed over the previous year, donating to heated inflationary conditions in multiple countries.