Title: Oil Up, Near Two-Month High as Market Remains Tight

May 27, 2022 12:59AM ET

By: AnalysisWatch

Oil prices in Asia surged on Friday morning, remaining near a two-month high. Brent crude prices made their biggest weekly gain in a month and a half, fuelled by the prospect of a European Union (EU) ban on Russian oil supplies and the upcoming summer marketing season in the US.

Brent crude futures rose 0.21% to USD 114.41 by 12:55 p.m. European time (4:55 GMT), after edging up to USD 118.17 earlier in the session, a benchmark that could gain about 4% over the week. WTI futures rose 0.09% to USD 114.19, a weekly gain of around 0.7%.

Stephen Innes, managing director at SPI Asset Management, told Reuters: Momentum is definitely building as many factors point to an expanding market, especially with the EU on the verge of a full Russian energy ban.

Ahead of the peak snow season in the US, refined product shortages in the West remain a concern, which is likely to keep oil prices elevated throughout the summer.

Brent and WTI contracts will end the week higher as the European Commission continues to seek unanimous support from the 27-member bloc for new sanctions against Russia.

Hungary is one of the member states still maintaining unanimous support. According to a senior Hungarian advisor, the country needs three and a half to four years to wean itself off Russian oil and make major investments to adjust its economy, adding that Hungary cannot support the EU's proposed oil embargo until all issues are agreed.

The combination of real supply cuts and Russia's increasing refusal to accept offers will make these commodities - oil and gas - significantly more expensive, Clifford Bennett, chief economist at ACY Securities, told Reuters.

The price of the black liquids has risen about 50 per cent since the start of the year.

Meanwhile, the Organisation of the Petroleum Exporting Countries and Allies (OPEC+) is expected to leave its 2021 oil production deal unchanged at a meeting on June 2. The cartel may raise its July production target by 432,000 barrels per day, rejecting Western calls for faster production increases to curb price gains, six OPEC+ sources told Reuters.