Oil prices surpassed $120 for the first time in more than two months after European Union (EU) leaders decided to cut Russian oil imports, international news outlets reported on Tuesday.
Global crude markets panicked during the early hours of the day, hitting their highest in more than two months. Brent crude stayed above $123 after briefly peaking at $124.10, its highest since 9 March 2022. The US West Texas Intermediate (WTI) crude rose as high as $119.85 per barrel before settling down at $118.5.
Oil futures today gained big on last month’s lows after the EU agreed in principle to slash 90 percent of Russia’s oil imports by the end of this year, cutting off a crucial source of money for Moscow’s invasion of Ukraine. The 27-nation coalition has been negotiating a total ban on Russian oil for weeks but has been met with staunch opposition from Hungarian Prime Minister Viktor Orban, who has stated an embargo would ruin his country’s economy.
With new arrangements uniting all parties against one, the embargo would reach 90 percent after Poland and Germany, which are also connected to the pipeline, stop taking delivery of Russian oil by the end of the year. It is noteworthy that until now, two-thirds of Russian oil imported into the EU was carried via tankers, with the remaining one-third delivered via the Druzhba pipeline through Poland.
The remaining 10 percent will be temporarily spared from sanctions in order for Hungary, Slovakia, and the Czech Republic, which are all connected to the pipeline’s southern portion, to continue to have access to fuel that cannot be quickly replaced.
Assuming today’s Brent surge continues to average $120 per barrel for the fortnight, this would most likely translate into a base price of Rs. 208 per liter in Pakistan. Further addition of Rs. 13 per liter for Inland Freight Equalisation Margin (IFEM) and other margins makes it Rs. 221 per liter.
