Oil prices could shoot up to a record $185 per barrel if the European Union acts to impose a full immediate ban on imports of Russian oil, JPMorgan says.
The EU has started tentative discussions on potentially imposing an embargo on Russian oil, but the bloc is still split on a ban on Russian energy imports. The biggest European economy—Germany—continues to resist an immediate oil embargo for now, saying an oil ban would plunge Germany, and Europe, into a deep recession. Germany, Hungary, and Austria, as well as some other EU members, continue to resist an immediate outright ban on Russian oil, although Germany signaled earlier this month that it could end its dependence on Russian oil this year.
If the EU escalates embargoes in the sixth package of sanctions against Russia over its invasion of Ukraine and decides to impose a full immediate embargo on Russian oil, then Brent Crude prices could soar by 65 percent to as much as $185 per barrel, Natasha Kaneva, Head of Global Commodities Strategy at J.P. Morgan, says, as carried by Bloomberg.
A full immediate ban would cut over 4 million barrels per day (bpd) of Russian supply, and China and India wouldn’t be able to absorb all those volumes very soon, Kaneva added.
Still, an immediate EU ban is not JPMorgan’s base-case scenario—the investment bank sees 2.1 million bpd of Russian supply to Europe cut. If the EU imposes a gradual phase-out ban on Russian oil over several months, as it did with the ban on Russian coal imports, adopted in early April but effective only from August, this would not impact oil prices as much, JPMorgan’s Kaneva says.
An EU embargo on Russian oil imports may be in the works, but drafting and preparing for such a ban would likely take “several months,” European officials told AFP last week.
A ban is in the works at the EU level, France’s Finance Minister Bruno Le Maire said today.
“I hope that in the weeks to come we will convince our European partners to stop importing Russian oil,” the minister told Europe 1 radio on Tuesday.
By Tsvetana Paraskova for Oilprice.com