Oil prices continue their biggest run in over a decade as we don’t have enough of anything and we are going to have less, states Phil Flynn of PRICE Futures Group.

We are short of refining capacity and now Europe will be short crude as they move forward on a Russian oil ban. We also have signs that China’s economy is gaining some steam with more stimulus coming from the Chinese government as well as the re-opening of Shanghai from covid lockdowns. And while the economic fallout from this Russian crude band will no doubt impact the global economy somehow, based on the actions of Russia in Ukraine, it still doesn’t seem like it will be enough.

The EU in announcing the oil ban said, “indeed, we had a very good discussion tonight. And I am very glad that the Leaders were able to agree in principle on the sixth sanctions package. This is very important. Thanks to this, the Council should now be able to finalize a ban on almost 90% of all Russian oil imports by the end of the year. This is an important step forward. We will soon return to the issue of the remaining 10% of pipeline oil.

Bloomberg reported that European Council President Charles Michel said late Monday during a summit in Brussels, “This immediately covers more than two-thirds of oil imports from Russia, cutting a huge source of financing for its war machine,” Michel said in a tweet. “Maximum pressure on Russia to end the war.”

The EU said, “I want to note that other elements in the package are also important. It is the de-SWIFTing of the Sberbank. The Sberbank is the biggest Russian bank, with 37% of the Russian banking sector. So this is good that we now de-SWIFT the Sberbank. There is a ban on insurance and reinsurance of Russian ships by EU companies; a ban on providing Russian companies with a whole range of business services. And, very important, there is the suspension of broadcasting in the European Union of three further Russian state outlets that were very typically spreading broadly the misinformation that we have witnessed over the last weeks and months.

The announcement sent oil prices soaring as the world scrambles to replace the Russian supply. Inflation fears also slowed the recently soaring US stock market on fear about the impact that oil prices might have on the overall economy. The market is also fearful that Russia will lash out after the ban goes into place. Yet it was not just the oil ban that gave oil support.

Bloomberg News reported, “Finally some better news on China’s economy. Purchasing manager’s surveys for May improved from their April slump, though they remained below the key 50 level dividing expansion and contraction, data showed Tuesday. And Shanghai continued its careful reopening as the city’s Covid outbreak appears to have been contained. Bloomberg goes on to say, “So it’s becoming clearer that April marked a bottom for the world’s second-largest economy. The big question now is whether we’ll see a 2020-style V-shaped recovery, or something more muted. While a summer spending spree can’t be ruled out given authorities’ efforts to expedite infrastructure programs, lending data suggest a reluctance on the part of private borrowers that may constrain a full-throated recovery.”

AAA gas prices show another record high. The current average for regular unleaded is $4.622. While the high prices are showing some signs of resistance and the futures are suggesting that retail prices should start to stabilize, the EU oil ban may make the gas price continue to stay high. I believe when it comes to gasoline prices on the gasoline side we should see those prices moderate just a little bit. We could see some strong strength and heating oil seasonally, and technically we still have some upside risk pretty much across the board. We still need to be very cautious up at these levels.

Learn more about Phil Flynn by visiting Price Futures Group.