EU Members Discuss Russian Energy Embargo
March 21, 2022
The European Union members are meeting today and an embargo on Russian energy is one of the topics. This news has the energy markets up again in early trading. Also supporting the upside is the news of an attack on a Saudi Arabian oil facility. With all the concerns around tight supplies in the market, any news like this has traders buying the market to protect against higher prices as future supplies may be impacted.
The 27-nation European Union relies on 40% of its gas from Russia. Banning Russian energy will be very hard for this group. Germany has said that it cannot stop Russia’s crude oil imports.
The IEA reported this past week that the outlook is bad for the disruptions in Russian oil supplies after its invasion of Ukraine and said Q2 was set for a 700,000 BPD oil supply deficit. The IEA reported that if the war continues, more supplies will be disrupted, and 3 million BPD of oil and products may not find a way to market beginning in April. Russia shut another refinery over the weekend as stockpiles build.
The Baker Hughes Rig Count Report had oil rigs down 3 to a total of 524 and last year there were 318 oil rigs in operations.
From Reuters reporter John Kemp: Brent futures open interest ((Open interest is the number of contracts (positions that have been opened) that have not been offset by either delivery or liquidation. For each contract outstanding, there must be one (long) buyer and one (short) seller). Open interest is defined as the number of open long positions.)) fell by a record 352 million barrels over the three weeks spanning Russia’s invasion of Ukraine from February 22 to March 15, tumbling to the lowest level since August 2015, as prices spiked higher, volatility increased, margins rose, and liquidity dried up.
Crude oil inventories are 12% below the five-year average for this time of year. Gasoline inventories are equal to the five-year average for this time of year. Distillates inventories are 16% below the five-year average for this time of year.