EU bans Russian oil after reaching compromise

Brent Crude Oil News and Analysis

  • EU reaches compromise on Russian oil ban – temporarily allowing pipeline deliveries to landlocked countries
  • Key technical levels assessed after Brent crude broke through the significant level of 114
  • IG Client Sentiment offers a mixed reading due to the recent rise in long positions

EU reaches compromise on Russian oil ban overnight

The long-awaited 6e wave of Russian sanctions was agreed in the early hours of Tuesday morning. The latest wave includes a ban on Russian oil transported by sea to the EU and will eventually seek to ban oil delivered by pipeline to landlocked countries such as Hungary, the Czech Republic and Slovakia.

The issue of expensive alternatives and complicated logistics to deliver oil to landlocked EU member states had delayed what would otherwise have been a fairly straightforward process. Eventually, the European Council agreed on a compromise, allowing Russian oil flows to the three aforementioned countries, which would lead to an immediate reduction of 75% of EU oil imports from Russia to 90% end of 2022. The deal is expected to be finalized in the coming days with details yet to be ironed out.

The ban on Russian oil further restricts an already tight oil market as oil producers operate close to capacity. Additional supply constraints have emerged due to a lack of investment in infrastructure as the world makes a concerted transition to greener and more sustainable energy sources. A weaker US dollar, the reopening of Shanghai and a general improvement in global risk sentiment certainly add to the bullish narrative.

Technical levels of Brent crude oil

Brent Crude prices appear to have finally broken above the rather bullish 114 level on the fourth ask. Subsequently, this decision was helped by the news of the EU compromise, which sent oil prices above the key level resistance zone (115.50 – 118.50). However, the recent decision appears to have found resistance at the March 23 meeting.rd high at 120.50 as intraday price action shows a short-term pullback from that level. The IRSclosing in on overbought territory, supports the idea that the recent advance may cool slightly before attempting another move higher.

Support currently resides on the upper side of the resistance zone (118.50) followed by 115.50 and the significant level of 114.

Brent Crude Oil Daily Chart

Source: Trading View, prepared by Richard Snow

Brent Crude Oil Monthly Chart

The monthly chart helps identify relevant upward resistance levels. After breaking through the resistance zone, we see an area around 126.00 which previously kept higher prices at bay in 2011 and 2012.

Brent Crude update: EU bans Russian oil after agreeing compromise

Source: Trading View, prepared by Richard Snow

IG customer sentiment complicates the bullish narrative

Retail clients, as a whole, were largely net short in terms of positioning. However, the recent surge in buying complicates the contrarian indicator.

Brent Crude update: EU bans Russian oil after agreeing compromise

Oil – American crude: Retail merchant data shows 39.05% of traders are net-long with a ratio of short to long traders at 1.56 to 1.

We usually take a view contrary to the sentiment of the crowdand the fact that traders are net-short suggests Oil – US crude prices could continue to rise.

The number of net long traders is 12.05% higher than yesterday and 7.08% higher than last week, while the number of net short traders is 3.71% higher than yesterday. yesterday and 27.21% higher than last week.

Positioning is less net-short than yesterday but more net-short since last week. The combination of current sentiment and recent shifts gives us a even more mixed Oil – Trading bias on US crude.

— Written by Richard Snow for DailyFX.com

Contact and follow Richard on Twitter: @RichardSnotowFX

Leave a Reply

%d bloggers like this: