WTI eyes $110.00 on renewed supply worries as EU progresses toward Russian oil embargo

• WTI sees more upside as Germany surrendered its opposition to the embargo on Russian oil.
• Finding a substitute for bulk exports of oil from Russia won’t be easy for the EU.
• The announcement of more stimulus from the PBOC has raised hopes of oil demand recovery.

West Texas Intermediate (WTI), futures on NYMEX, are trading near Thursday’s last traded price at $104.16. The oil prices have witnessed a strong rebound this week as supply worries overpowered the demand concerns. Supply concerns due to the prohibition of Russian oil by the Western leaders and demand worries due to the Covid-19 resurgence in China were resulting in a tug of war. Although bulls got underpinned and are likely to advance further as European Union (EU) progressed on the embargo on Russian oil.

The EU is aiming to prohibit the imports of oil from Russia sooner after Germany dropped its opposition. In earlier discussions, Germany was leading the criticism against the embargo on Russian oil overnight amid its higher dependency on fossil fuels and energy from Russia. Now, the major automobile exporter has surrendered its opposition, so the EU will do the required paperwork at the earliest. This may fuel the supply worries as a substitution of bulk Russian oil exports will not be a cakewalk. So probation of Russian oil by the eurozone in an already tight market will weigh pressure on the bulls.

Meanwhile, the announcement of prudent monetary policy guidance by the People’s Bank of China (PBOC) will reduce the demand worries in the dragon economy due to the Covid-19 resurgence. More liquidity infusion by the PBOC in its economy will ram-up the aggregate demand and henceforth the demand for oil. It is worth noting that China is the largest importer of oil and demand recovery in China will have a positive impact on oil prices principally.