EU Bans Russian Oil: Brent Crude Trading Higher after the News
Brent Crude Oil News and Analysis
- EU sanctions to phase out Russian oil awaiting approval from 27 member nations
- Brent crude trading higher but the long-term nature of the ban supports a more gradual move than an immediate spike
- Key Brent crude technical levels to consider
EU to Vote on Proposed Sanctions Later Today (Wednesday)
EU Commissioner, Ursula von der Leyen presented the 6th round of proposed sanctions on Russia this morning with the biggest one being the ban of Russian oil. European imports of Russian oil were previously tolerated while the bloc looked for alternative suppliers. von der Leyen issued a warning suggesting that the plan will have its challenges, “it will not be easy, but we simply have to work on it”.
EU Commissioner Ursula von der Leyen
The oil ban is set to be phased in, with supplies of crude oil to be cut within 6 months and refined products by year end – in an attempt to minimize the economic impact of the sanctions on the local economy. Additional sanctions include: banning Russia’s largest bank Sberbank from SWIFT along with three other banks, travel bans and the freezing of assets of high-ranking Russian military officials, and the removal of three Russian state-owned broadcasters from EU airwaves.
Von der Leyen added, “This will solidify the complete isolation of the Russian financial sector from the global system”. Western nations have sought to cut Russia off from the global economy in protest of Russia’s invasion of Ukraine but struggled to do so owing to Europe’s dependency on Russia for oil and gas. Phasing out oil purchases and preventing Russia’s largest lender from transacting via SWIFT turns the screws even tighter as Russia will have to look to other avenues to fund its “special operation”.
The proposal awaits approval from the 27 member nations later today.
Brent Crude Oil: Reaction and Key Technical levels
The immediate reaction was rather slow at first, however, Brent crude has gained around 2%, trading around 107/108 dollars a barrel. Due to the nature of the ban - phasing out oil purchases over time – the price effect is likely to be more gradual as opposed to an announcement of an immediate ban.
Crude has been trading within a symmetrical triangle for a number of weeks now as the market continues its period of consolidation after the ‘peak panic’ in early March. The symmetrical triangle is considered to be a neutral pattern, therefore, warranting consideration of the prior trend for any potential directional clues.
A strong dollar ahead of the Fed’s FOMC meeting today and lower growth forecasts for China and other major oil purchasing countries present a number of challenges to the upside. The zone of resistance at 109.15 – 110.00 could provide short term resistance, with a break above highlighting the prior high of 114.00.
Rejection at the upper side of the symmetrical triangle, however, could see a continuation of the triangle pattern and lower price action. Support rests around the underside of the symmetrical triangle at 102.60 followed by the psychological level of 100.00.
Brent Crude Daily (Cash) Chart via IG
Source: IG, prepared by Richard Snow
The monthly chart highlights the zone of resistance (blue rectangle) and the massive retracement from the spike high in March. Challenges to global growth and soaring inflation could prevent prices from breaching the 115.00 – 118.50 for a significant period of time, if at all.
Brent Crude Monthly (Cash) Chart via IG
Source: IG, prepared by Richard Snow
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--- Written by Richard Snow for DailyFX.com
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.