Oil prices extend gains after ban on Russian crude

London — Oil prices extended a bull run on Tuesday after the EU agreed to a partial ban on Russian oil and China lifted some coronavirus restrictions as demand for crude rises in the lead up to peak summer consumption in the US and Europe.

Brent crude for July, which expires on Tuesday, rose $2.31, or 1.9%, to $123.98 a barrel by 8.23am GMT, after earlier reaching $124.10 — its highest since March 9. The more active August contract rose $2.44 to $120.04.

West Texas Intermediate was trading at $119.34/bbl, up $4.27 in a fourth straight session of gains and its highest since March 9. The US market was closed on Monday for a public holiday.

Both July-loading contracts are set to end-May as the sixth straight month of rising prices.

EU leaders agreed in principle to cut 90% of oil imports from Russia by the end of 2022, the bloc’s toughest sanction yet since the country’s invasion of Ukraine three months ago.

The embargo exempts pipeline oil from Russia as a concession to Hungary.

“As two-thirds of Russian crude oil exports are seaborne, about 1.5-million barrels a day of oil will need to be replaced by the EU,” PVM analyst Tamas Varga said.

“This volume is actually closer to 2.1-2.2-million bbl/day as Poland and Germany are planning to phase out pipeline purchases by the end of the year.”

Prices drew further support after Shanghai has announced an end to its two-month Covid-19 lockdown, and will allow the vast majority of people in China’s largest city to leave their homes and drive their cars from Wednesday.

On the production side, Opec+ is set to stick to a modest July output hike by 432,000 barrels per day, six sources in the cartel said, rebuffing Western calls for a faster increase to lower surging prices.

Reuters