What will happen to oil prices after the EU embargo on supplies from Russia

Alexey Gromov, Principal Director on Energy Studies of the Institute for Energy and Finance, commented to the Secret of the Firm magazine on the prospects for an increase in world oil prices if the EU countries impose an embargo on the supply of Russian oil and oil products.

Now Russia supplies the world market with about 7 million barrels of oil per day. After the imposition of an embargo by the EU, this volume may be reduced by 40-50% by the end of the year, Alexey Gromov said. According to him, Europeans can theoretically replace crude oil from Russia with raw materials from the countries of the Middle East and the Persian Gulf.

“Of course, such oil for Europe will cost more than the market. Because, for example, the authorities of Saudi Arabia are well aware that the Europeans have no other alternatives to Russian oil in terms of quality and other technical characteristics,” the expert explained.

In his opinion, the EU is unlikely to completely replace the import of Russian oil products, primarily diesel fuel. The fact is that Russia is one of the world's largest producers of these products, and even the United States will not be able to cover the demand in the entire European market with its supplies. Therefore, if the embargo is nevertheless introduced, serious economic problems will begin in Europe, the expert believes.

“At the moment after the imposition of the embargo, oil prices will jump up and can easily reach $130-140 per barrel. However, in the second half of the year, the situation may deteriorate sharply. Sooner or later, China will begin to lift coronavirus restrictions, which means that the demand for oil in this country will grow. On the eve of the autumn-winter season, prices can break through the psychological barrier of $150 and go to new heights,” he explained.