Are Oil Prices Soaring? EU Impacts the Energy Markets

On Tuesday, oil rose to its highest level in seven weeks; it received a boost from the European Union’s continued drive for a ban on Russian oil imports, which would reduce supply. Investors focused on rising demand following the lifting of China’s COVID restrictions.

On Monday, EU foreign ministers failed to persuade Hungary to rescind its veto on the proposed oil embargo. However, some diplomats now expect an agreement on a gradual ban on Russian oil to be reached during a May 30-31 session. Brent crude surged to $115.14, its highest level since March 28; it was up 46 cents, or 0.4 percent, to $114.70 at 0815 GMT. WTI crude in the United States fell 26 cents, or 0.2 percent, to $113.94. Experts believe that the main force behind the multi-week highs in prices in the oil market is solely the rising gasoline and distillate prices in the United States.

Fluctuations Continue

Crude prices have risen sharply in 2022, with Brent touching $139 in early March, its highest level since 2008, as Russia’s invasion of Ukraine compounded supply fears. On Tuesday, oil gained support on optimism of a revival in demand in China; looking to lift COVID curbs that have harmed its economy. On Tuesday, Shanghai accomplished the long-awaited milestone of three days without any new COVID-19 cases outside quarantine zones. It gave forth its clear plan for ending the lockdown, which is now in its seventh week.

The “intensifying geopolitical tension” between the EU and Russia, as Sweden and Finland seek to join NATO, lifted prices, according to CMC Markets analyst Tina Teng. Further reductions in US gasoline stockpiles are also a concern. Weekly inventory reports are likely to indicate an increase in crude stocks and a decrease in distillate and gasoline inventories. At 2030 GMT, the American Petroleum Institute will release its first report.