WTI rallies into $105.00s on reports EU close to agreement on Russia oil embargo

• WTI rallied to its highest level since last Tuesday above $105.00 and eyes a retest of recent near $110 highs.
• Traders cited a WSJ report alleging that the EU nearing agreement on a Russian oil import embargo as supporting prices.

Oil prices hit their highest levels since last Tuesday, with front-month WTI futures rallying to the north of the $105.00 per barrel mark, with traders citing a report from the WSJ alleging that the EU is on the cusp of agreeing to implement a blanket ban on Russian oil imports. At current levels in the mid-$105.00s, WTI is trading higher by nearly $3.40 on the day, with tailwinds also coming from a decent rebound in US equity markets amid earnings optimism.

Regarding the latest reports of an EU embargo on Russian crude, the WSJ reported that Germany has dropped its opposition to an embargo on Russian oil imports. According to the WSJ, this "clears the way" for a wider EU ban on oil imports from Russia, given that Berlin had been one of the main opponents on an embargo up until now. The change in stance comes after Russia earlier in the week cut off gas flows to Poland and Bulgaria after the two countries refused to pay for the gas in roubles, as has been Russia's demand. EU officials accused Moscow of using fossil fuels to blackmail Europe over its support of Ukraine.

Fears about the impact of an EU embargo on Russian oil are, for now, helping to negate fears about demand weakness as a result of lockdowns in China as restrictions in Beijing spread and after the latest weaker than expected US Q1 2022 GDP numbers. The WTI bulls will be eyeing a retest of last week’s highs near $110 and oil may well get a helping hand this way if EU/Russia tensions continue to escalate.

Elsewhere, focus will shift back to OPEC+ next week, with the cartel set to meet on 5 May and likely to agree on another 400K barrel per day output hike in June. Analysts note that OPEC+’s sluggish output hiking policy, which many nations have been struggling to keep up with anyway, doesn’t come close to making up for the loss of as much as 3M BPD in Russian output expected from May due to sanctions.