Crude futures hit two-month high above $118 after EU ban on Russian oil

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The price of oil rose to a two-month high on Tuesday, after the European Union reached an agreement that is about to ban most Russian oil by the end of the year.

Price action
  • West Texas Intermediate Crude for July Delivery CL.1,
    + 3.36%

    + 3.36%
    rose $ 3.70, or 3.2%, to $ 118.80 a barrel. On Friday, the WTI rose 0.9% to close at $ 115.17 a barrel on the New York Stock Exchange, the highest close of a first-month contract since March 11, according to Dow Jones Market Data.

  • July Brent crude BRN00,
    + 1.78%

    + 1.55%
    it rose $ 1.55, or 1.2%, to $ 123.22 a barrel, the highest level since early March. Monday’s stock saw Brent rise 1.7% to $ 117.60 a barrel, the highest close since early March.

  • July gasoline RBM22,
    + 1.10%
    rose 1.1% to $ 4.0887 a gallon, while in June, HOM22 diesel
    + 3.93%
    rose 3.6% to $ 4.148 a gallon.

  • Natural gas in July fell NGN22,

    rose 0.1% to $ 8.743 per million British thermal units.

Market drivers

U.S. investors returning from Monday’s Memorial Day party were greeted by news that EU leaders had reached an agreement to punish Russia for invading Ukraine, reducing its need for energy assets. of the nation at war.

The diluted embargo covers Russian oil supplied by sea, with a temporary exemption for imports delivered by pipelines, needed to bring Hungary on board. The EU said the deal covers more than two-thirds of Russia’s oil imports and is expected to cut 90 percent of Russia’s crude oil by the end of this year.

“While oil has advanced to levels that seem interesting to sell a top, the positive pressure is too strong to bet on a short-term downward correction. Oil short has become a risky bet, already that after the European ban, there is a stronger argument for a new extension of profits, “Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, said in a note to traders.

Ozkardeskaya said the “relentless positive pressure” on oil prices on both sides of the Atlantic was worrisome, although US inflation figures have been declining. Data released on Monday showed that Germany’s annual inflation rate in May was the highest reading in 50 years.

Brent crude for the first month of July gained more than 11% this month, and West Texas Intermediate crude for July rose 9.9%. It will be the sixth consecutive monthly win and the longest monthly streak of each since April 2011, according to Dow Jones Market Data. It is also the largest monthly rise since January for everyone.

Prices also eased news of easing restrictions on China, the world’s largest importer of crude oil. Shanghai authorities said they would take major steps on Wednesday to reopen after a two-month blockade by COVID-19 in the country’s largest city. Beijing eased pandemic restrictions on Sunday, declaring a recent outbreak under control.

Data released on Tuesday showed that activity in Chinese factories and the services sector improved in May, although indicators showed a contraction in economic activity as the country struggled with COVID blockades.

The rise in crude oil comes ahead of Thursday’s virtual meeting of the Organization of the Petroleum Exporting Countries and non-member countries, including Russia, to discuss production plans. The cartel is expected to adhere to an oil production agreement agreed last year and increase July production targets by 432,000 barrels a day.

The highest U.S. benchmark result in more than 11 weeks came on Friday when the summer driving season began during Memorial Day weekend and inventories remain at low levels. For the holiday season, the average U.S. retail price of regular gasoline was $ 4.59 a gallon, the highest (actual) adjusted price for inflation since 2012, according to the U.S. US energy.

Reads: High gasoline prices are not stopping Americans from getting on the road this summer

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