Why Are Oil Prices Rising to More than Two-Month Highs?

Traders awaited word from the European Union on whether it would agree to prohibit Russian oil imports. Hence, oil prices surged on Monday; it reached their highest level in over two months.

At 0659 GMT, the Brent crude futures contract for July, which expires on Tuesday, was up 47 cents, or 0.4 percent, at $119.90 a barrel, after reaching a high of $120.50 earlier in the session. The more active August Brent contract increased 61 cents, or 0.5 percent, to $116.17 a barrel. WTI oil futures in the United States rose 72 cents, or 0.6 percent, to $115.79 a barrel, continuing strong gains from the previous week. On Monday and Tuesday, the EU will gather to debate the sixth set of sanctions against Russia for its invasion of Ukraine, which Moscow refers to as a “special military operation.”

Threats on Russian Oil

Officials indicated that EU nations failed to agree on an embargo on Russian oil on Sunday; hence, discussions on a compromise to block seaborne exports of Russian oil while permitting pipeline deliveries will continue ahead of the summit on Monday afternoon. In the short term, the European group will find it difficult to lessen its energy reliance on Russia. However, an instant ban is unlikely, and the demands may keep oil prices stable in the short run. More sanctions on Russian oil would squeeze an already tight crude market; it is already under stress from increased demand for gasoline, diesel, and jet fuel ahead of the high summer demand season in the US and Europe.

According to traders, large refining margins for diesel and gasoline in Europe and the United States have pushed prices for some types of physical crude oil to new highs. When the OPEC+ will meet on Thursday, they should reject Western proposals to accelerate increases in their oil output levels; this will underscore market tightness. According to six OPEC+ sources, they will adhere to their existing intentions to add 432,000 barrels per day in July.