Oil prices rose more than 1 percent on Tuesday, reaching $119 per barrel of WTI and $123 per barrel of Brent, after EU leaders reached an agreement to ban imports of 90 percent of Russian oil by the end of 2022.
The price of oil in global markets is at its highest level since early March, when prices soared in response to Russia's aggression against Ukraine. As the end of the month is also approaching, it's worth taking a look at an event that probably hasn't happened yet this decade. Namely, oil seems to have increased in price for the sixth month in a row. In May alone, the price increase may reach about 15 percent. In turn, since the beginning of the year, the price of WTI crude oil has already risen by about 60 percent.
Coming back to the EU decision, this agreement resolves the impasse with Hungary over the toughest sanctions ever imposed on Moscow and paves the way for other elements of the sixth package, including the exclusion of Russia's largest bank from the SWIFT system. However, some analysts suggest that the rise in oil prices may be modest as the market has already priced in the move.
China's oil demand is expected to rise after the cities of Beijing and Shanghai eased restrictions on Covid, with some reservations about the impact of soaring gasoline prices on global consumption. In the United States, the price of gasoline hit record highs, costing more than $4 per gallon in late May, having risen more than 100 percent in six months.
In terms of production, meanwhile, OPEC+ is expected to stick with its policy of moderate output growth at Thursday's meeting, rejecting calls from the West to increase production to lower prices.
OPEC+ is not meeting its production targets. The shortfall was significant in April as capacity constraints and international sanctions weakened supply. Output from the OPEC+ coalition declined for the second month in a row, falling by about 500,000 b/d from March to 37.56 million b/d in April. Production was nearly 2.4 million b/d below the group's combined target of 39.94 million b/d for the month.
Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Forex service)
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