Brent tops $124 as European Union to ban 90% of Russia oil by year-end

Ban likely to cost moscow billions of dollars every year

European Union leaders handed Hungary concessions to agree an oil embargo on Russia over its invasion of Ukraine, sealing a deal in the early hours of Tuesday that aims to cut 90% of Russia's crude imports into the bloc by the end of the year.

As a result, oil prices extended a bull run as they touched $124.64 on Tuesday — its highest since March 9. 

The deal excludes from the embargo shipments by pipeline, which Hungary relies on for Russian oil. It aims to reduce Moscow's income to finance the war it launched more than three months ago in Ukraine, with some of the toughest EU sanctions yet.

"The important news is that the EU is still united in its purpose; the purpose is to stop Russia's aggressive war in Ukraine," Latvian Prime Minister Krisjanis Karins said.

The ban on seaborne imports of Russian oil will be imposed with a phase-in period of six months for crude oil and eight months for refined products, a European Commission spokesperson said. That timeline would kick in once the sanctions are formally adopted, with EU states aiming to do so this week. Two thirds of the Russian oil imported by the EU comes via tanker and one third by the Druzhba pipeline.

In total, the embargo aims to cover 90% of all Russian imports by the end of 2022. That would include seaborne deliveries as well as Poland and Germany stopping their own imports of Russian oil via pipeline by then, which they have pledged to do.

The remaining 10% would be temporarily exempt from the embargo so that Hungary, Slovakia and the Czech Republic have access via the Druzhba pipeline from Russia.

With energy prices soaring, leaders will ask the EU's executive Commission to explore ways to curb them, such as through temporary price caps, and work on potential reforms to Europe's electricity market — a move backed by countries including Spain and Greece, but which countries including Germany have opposed.

They are also set to endorse a Commission plan to wean itself off Russian fossil fuels within years through a faster rollout of renewable energy, improvements in saving energy, and more investments in energy infrastructure.

Meanwhile, Russia widened its gas cuts to Europe with Gazprom turning off supply to top Dutch trader GasTerra escalating the economic battle between Moscow and Brussels and pushing up European gas prices.

GasTerra, which buys and trades gas on behalf of the Dutch government, said it had contracted elsewhere for the 2 billion cubic metres (bcm) of gas it had expected to receive from Gazprom through October.