- The EU embargo on seaborne Russian crude oil exports and the G7 price cap on Russian oil are both less than a month away.
- While a global economic slowdown and weak oil demand in China have capped prices, looming supply disruptions will likely send oil prices higher.
- A lack of refinery capacity and crude oil disruptions will drive the price of fuels higher as well, particularly the price of diesel.
Less than a month from now, an embargo on seaborne Russian crude oil exports to the European Union will come into effect. As a result, global oil supply is set to tighten considerably as Russia is the biggest oil and fuels exporter in the world. And the market is preparing.
Hedge funds once again like oil, and are buying it on the futures market in considerable volumes, according to Reuters’ John Kemp. Last week, the buying reached 22 million barrels of Brent crude and 15 million barrels of West Texas Intermediate.
India is buying Russian crude at a discount, so it is buying a lot: its share of Middle Eastern oil imports fell to the lowest in 19 months in September, according to new data. Russia overtook Saudi Arabia as India’s number-two supplier after Iraq.
China is also buying Russian oil and not giving any indications it’s going to stop when the embargo enters into effect. The same is true of the G7 price cap for Russian crude that should also be coming into effect in a few weeks. China has already stated this will not change its current oil-buying habits.
Yet, with an EU embargo and a G7 price cap, what will almost certainly happen by the end of the year is that oil will become more expensive than it is now. Perhaps more worryingly, fuels – especially diesel…
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