Oil prices rose to a two-month high on Monday, as traders waited to see if the European Union might reach an agreement on a Russian oil embargo ahead of a meeting on the sixth package of sanctions once morest Moscow over the Ukraine war.
Brent crude futures for July rose more than a dollar to $120.50 a barrel, while US West Texas Intermediate crude futures jumped a dollar to $116.10 a barrel, continuing the strong gains made last week.
European Union leaders are scheduled to meet on Monday and Tuesday to discuss the sixth package of sanctions once morest Russia over the Ukraine war.
Any additional ban on Russian oil will lead to a supply shortage in the crude oil market, which is already under pressure on supplies amid increased demand for gasoline, diesel and jet fuel ahead of the peak summer demand season in the United States and Europe.
European Union governments failed to agree on a Russian oil embargo on Sunday but will continue talks on a deal to ban sea shipments of Russian oil while allowing pipeline deliveries ahead of Monday followingnoon’s summit, officials said.
If this is agreed, Hungary, Slovakia and the Czech Republic will be allowed to continue receiving Russian oil through the Druzhba pipeline for some time until alternative supplies are arranged.
Underlining the tight supply in the market, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, called OPEC+, are expected to reject Western calls to speed up their oil production increase when they meet on Thursday. Six OPEC+ sources told Archyde.com that OPEC+ would stick to its plan to add 432,000 bpd in July.
The oil market was also tense following Iran said on Friday that its navy had seized two Greek oil tankers in retaliation for the United States’ confiscation of Iranian oil from an oil tanker seized off the Greek coast.
“This raises the specter of further disruption to the flow of oil through the Strait of Hormuz, which carries a third of world trade,” analysts (ANZ Research) said in a note.
Oil prices were also supported by the dollar’s decline following investors abandoned expectations of an interest rate hike in the United States and as concerns regarding a global recession faded. A falling dollar makes oil less expensive for importers in other currencies.
