Oil prices climbed on Monday, hitting their highest in more than two months, as traders waited to see if the European Union would reach an agreement on banning Russian oil imports to sanction Moscow for its invasion of Ukraine.
The Brent crude futures contract for July, which expires on Tuesday, was up 37 cents, or 0.3%, at $119.80 a barrel at 0534 GMT, after rising to as high as $120.50 earlier in the session. The more active Brent contract for August rose 67 cents, or 0.6%, to $116.23 a barrel.
Meanwhile, U.S. West Texas Intermediate (WTI) crude futures jumped 78 cents, or 0.7%, to $115.85 a barrel, extending solid gains made last week.
The EU is due to meet on Monday and Tuesday to discuss the sixth package of sanctions against Russia for its invasion of Ukraine, actions Moscow calls a “special military operation”.
“If we look at the recent price movement, it seems that the market has factored in that the European Union may reach a deal on some form of restrictions on Russian crude. We may see further upside only if it is a complete ban. Any watered-down deal or one which includes exemptions may not have much positive impact,” Madhavi Mehta, commodity research analyst at Kotak Securities.
EU governments failed to agree on an embargo on Russian oil on Sunday, but will continue talks on a deal to ban seaborne deliveries of Russian oil while allowing deliveries by pipeline, ahead of the summit on Monday afternoon, officials said.
Any further ban on Russian oil would tighten a crude market already strained for supply amid rising demand for gasoline, diesel and jet fuel ahead of the peak summer demand season in the United States and Europe.
Consequently, The key hub of Shanghai allowed all manufacturers to resume operations from June, while officials said Beijing’s coronavirus outbreak is under control.
China’s dogged adherence to its Covid Zero policy at all costs — epitomized by Shanghai’s lockdown that began in late March and restrictions elsewhere — has sapped energy demand, and an easing would help to support global consumption. Administration officials have both warned of the economic damage stemming from the curbs and pledged support to offset the impact.