Oil Prices Surpass $120 per Barrel as Europe Considers Sanctions on Russian Energy Imports

The PCK Raffinerie oil refinery, which receives crude oil from Russia via the "Friendship" pipeline, is pictured in Schwedt/Oder, Germany, on March 8, 2022. (Hannibal Hanschke/Reuters)

Oil prices remained elevated during early trading on May 30 as traders await Europe’s decision on Russian oil import sanctions.

The Brent crude oil futures contract for July hit $120.02 per barrel at 11 a.m. UTC (7 a.m. Eastern time) on May 30, its highest level in over two months. Meanwhile, U.S. West Texas Intermediate (WTI) crude futures hit $115.72 per barrel. The European Union is scheduled to meet on May 30–31 to discuss the sixth package of sanctions against Russia for its invasion of Ukraine.

In its past five sanction packages, the EU targeted over 1,000 key Russian individuals, banks, and businesses. The sixth package was announced on May 4 but EU member states have yet to arrive at a consensus about implementing it, since many nations are highly dependent on Russian energy imports.

“It’s still quite difficult for the European group to reduce its energy dependency on Russia in the near term. That said, an immediate import ban is less possible, and demand may keep oil prices afloat in the near term,” said Leona Liu, an analyst at Singapore-based DailyFX, according to Reuters.

Europe is the largest purchaser of Russian energy. About 27 percent of the bloc’s crude oil imports in 2021 came from Russia. This comes to about 2.4 million barrels per day of oil, out of which 35 percent was delivered through pipelines.

EU countries like Hungary, Slovakia, Bulgaria, and the Czech Republic are not in a position to take steps against Russian oil.

Over 60 percent of Hungary’s oil and 85 percent of its natural gas come from Russia. Landlocked Slovakia and the Czech Republic rely on the Druzhba pipeline from Russia to meet their oil demands. The EU had proposed a longer transition for these three nations as well as 2 billion euros ($2.15 billion) in funding to boosting oil infrastructure.

One diplomat told CNN that the EU was in its “last stretch” of agreeing to the terms of an oil embargo but required more time to convince nations like Hungary. The European Union can only impose sanctions if all 27 member states agree to it.

“We do understand their special situation, we do understand their security of supply problem, we do understand their search for assurances to be able to solve that,” the diplomat said.

Revenue from oil and gas accounted for about 43 percent of Russia’s federal budget between 2011 and 2020. As such, any embargo on oil and gas would cause “significant financial pain” to the Kremlin, Tamas Varga of oil broker PVM said to CNBC.

Despite the EU’s intention to hurt Russia for attacking Ukraine, the bloc’s purchase of Russian oil and gas is supporting Moscow in the war, he pointed out.

“In the absence of firm additional retaliatory measures, the EU still finances Russia in the conflict. In the first three months of the war, it acquired energy in the value of $60 billion, hardly a recipe to cause financial strain for the invader,” Varga said.

Reuters and The Associated Press contributed to this report.