Title: Oil prices extend gains after EU bans most Russia oil imports

May 31, 2022 04:02AM ET

By: AnalysisWatch

Oil prices rose on Tuesday after the EU agreed to cut oil imports from Russia, adding to concerns about a tightening market already strained by supply and increased demand ahead of the summer peak season in the US and Europe.

At 0650 GMT, Brent crude for July, which expires on Tuesday, rose $2.19, or 1.8 percent, to $123.86 a barrel, having earlier risen to $124.10-the highest level since March 9.

The more active August contract rose $2.25 to $119.85.

EU leaders agreed in principle to cut 90 percent of oil imports from Russia by the end of 2022, resolving a standoff with Hungary over the bloc's toughest-ever sanction against Moscow since the invasion of Ukraine three months ago.

Oil prices reached their highest level since 2008 in March, and have risen by more than 55 percent this year.

They should receive further support as demand from China is expected to increase following the easing of COVID-19 restrictions.

Shanghai has announced that the two-month long lockdown has ended and will allow the vast majority of people in China's largest city to leave their homes and drive from Wednesday.

On the production side, OPEC+ will stick to last year's deal at its meeting on Thursday with a modest production increase in July of 432,000 barrels a day, according to six OPEC+ sources, rejecting Western demands for a faster increase to bring down soaring prices.

Members of the group—the Organization of Petroleum Exporting Countries and allies led by Russia—argue that the oil market is in balance and that recent price rises are unrelated to fundamentals.