HOUSTON: Oil prices extended their bull run on Tuesday after the EU agreed to a partial, phased ban on Russian oil and China decided to lift some COVID-19 restrictions and the summer driving season in the US United debuted.
Brent crude for July, which expires Tuesday, rose $1.58, or 1.3%, to $123.25 a barrel as of 12:30 p.m. ET (4:30 p.m. GMT), after hitting 125.28 $ previously – its highest since March 9. a high of $120.80.
The premium for August-loaded Brent contracts on a six-month spread hit a nine-week high near $15 a barrel, indicating the current tightness in supply.
U.S. West Texas Intermediate crude traded at $117.12 a barrel, up $2.04 in a fourth straight session of gains, up 1.8% from Friday’s close, and hit its highest since March 9. There were no settlements on US Memorial Day.
Both benchmarks were expected to end May up for a sixth consecutive month, gaining around 75% over the period.
“Oil prices continue their strongest rise in over a decade because we don’t have enough of anything and we’re going to have less,” said Phil Flynn, analyst at Price Futures group.
“We are running out of refining capacity and now Europe will run out of crude as they go ahead with a ban on Russian oil,” he added.
EU leaders have agreed in principle to cut oil imports from Russia by 90%, the bloc’s toughest sanction to date against Moscow since the invasion of Ukraine three months ago.
Once fully enacted, the sanctions on crude will be staggered over six months and on refined products over eight months. The embargo exempts pipeline oil from Russia as a concession to Hungary.
OPEC+ is expected to stick to a modest production increase of 432,000 barrels per day in July, OPEC+ sources said.
“Slumping Russian crude exports will keep prices high this year, although we expect larger non-Russian volumes, particularly from OPEC members and North America, to help bring prices down. price of around $120 a barrel currently at $100 by the end of the year,” Capital said. Economic economist Edward Gardner wrote in a note.
Crude production in the United States
U.S. crude oil production rose more than 3% in March to 11.7 million bpd, its highest level since November, the government said. However, production has been slow to recover from the impact of the coronavirus pandemic and is still well below its all-time high of 12.3 million bpd in 2019.
Oil prices found further support as Shanghai announced the end of its COVID-19 lockdown and will allow residents of China’s largest city to leave their homes and drive their cars from Wednesday.
Still, price gains were limited by inflation fears after hawkish comments from a Federal Reserve official spooked stock investors.
Gasoline Retail Prices
U.S. retail gasoline prices also hit a record national average of $4.622 a gallon, according to AAA gasoline price data, as Memorial Day weekend marked the official start of of the summer driving season.