The European Union (EU) is planning a full embargo on all Russian oil, and JP Morgan has said that this move will raise the price per barrel of oil beyond $185.
France has an election this weekend and the EU is aiming to minimize support for incumbent French President Macron’s opponent, Marine Le Pen, by waiting until after the second round of voting to implement the embargo.
Macron apparently “won” the first round of voting, despite the general dislike by the French public. The EU appears to want to wait until Macron has been reinstalled into power before making their next moves.
It is no secret that Europe heavily relies on Russian oil and gas, Germany being one of the biggest purchasers which buys at least 55 percent of the country’s supply.
While it is stated that these upcoming embargos will hinder Russia, they won’t. Russia has a key power position right now, as buying of Russian oil hits all-time highs and Russia is also exporting more oil than ever. The only people that will be hurt by the embargo are the people within the European Union.
According to reports from JP Morgan, Russian oil exports have risen since the beginning of the Russia-Ukraine war, with an average of an additional 360 thousand barrels per day.
JP Morgan has projected that the European buyers will cut Russia oil purchases by at least 2 million barrels of oil per day by the end of 2022.
Zero Hedge reported:
“Of course, it will come as no surprise to anyone that aggressive purchases of Russian oil by China and India – who have both ramped up purchases of Russian oil in the past two months, and Turkey has also increased volumes to pre-COVID levels – have offset some of the loss,”
“Given time, JPM estimates that together these three countries can likely import an additional 1 mbd beyond what they are importing today.”
“A full and immediate embargo is likely to hurt European consumers more than Russian producers in the near term,” Zero Hedge added.
“More importantly, a full, immediate ban would likely drive Brent crude oil prices to $185 / bbl as more than 4 mbd of Russian oil supplies would be displaced with neither room nor time to re-route them to China, India, or other potential substitute buyers.”
India took the opportunity to snap up cheap Russian oil and has increased its imports three times over in the past year. Countries still working with Russia are likely to increase exports too.
The European Union is treading into murky waters, as they don’t really have anything to offer apart from euros, which in the grand scheme of things, are essentially useless. Russia does not need the euro, but the euro definitely needs the oil.
If the EU does follow through on its threat to issue a full embargo, the price of oil is expected to once again spike higher.