Oil prices climb above $120 a barrel ahead of EU meeting on Russia sanctions

Storage tanks are seen at the Los Angeles Marathon Petroleum refinery, which processes domestic and imported crude oil, in Carson, California, US, March 11, 2022. Photo taken March 11, 2022. Photo taken with a drone. Photograph: Ping Guan/Reuters

LONDON (Reuters) – Oil prices jumped above $120 a barrel on Monday, hitting their highest level in more than two months, as traders waited to see if the European Union meeting would reach an agreement on a ban on Russian oil imports.

Brent crude futures for July, which expire on Tuesday, rose 59 cents, or 0.5 percent, to $120.02 a barrel at 1100 GMT. The August Brent contract, the most active, rose 74 cents, or 0.6%, to $116.30 a barrel.

US West Texas Intermediate crude futures jumped 65 cents, or 0.6%, to $115.72 a barrel, extending last week’s strong gains.

The European Union is due to meet on Monday and Tuesday to discuss the sixth package of sanctions against Russia for its invasion of Ukraine, measures Moscow calls a “special military operation”.

“The overall background is constantly changing and that will determine how much crude oil demand improves over the next 12 months,” said Edward Moya, chief market analyst at OANDA.

“Geopolitics remains important but much of Europe’s influence in reducing its dependence on Russian energy has been underestimated.”

European Union governments failed to agree on a Russian oil embargo on Sunday, officials said, but would continue talks on a deal to ban seaborne shipments while allowing pipeline deliveries, ahead of the summit on Monday afternoon. Read more

“It remains very difficult for the European Community to reduce its energy dependence on Russia in the near term. However, an immediate import ban is less likely, and demand may keep oil prices steady in the near term,” said analyst Leona Liu. The DailyFX is based in Singapore.

Any additional ban on Russian oil would tighten the crude market, which is already under pressure on supplies amid rising demand for gasoline, diesel and jet fuel ahead of the peak summer demand season in the United States and Europe.

Underlining the market’s tightness, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, dubbed OPEC+, are set to reject Western calls to speed up production increases when they meet on Thursday. Six OPEC+ sources told Reuters it would stick to current plans to increase production target in July by 432,000 bpd. Read more

Additional reporting by Sonali Paul in Melbourne and Kostav Samanta in Singapore; Editing by Bradley Perrett and Jason Neely

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