Oil Rises On EU's Russian Oil Ban Effort, Demand Hopes

Oil hit its highest in seven weeks on Tuesday, supported by the European Union's ongoing push for a ban on Russian oil imports that would tighten supply and as investors focused on higher demand from an easing of China's COVID lockdowns.

EU foreign ministers failed on Monday in their effort to pressure Hungary to lift its veto on the proposed oil embargo. But some diplomats now point to a May 30-31 summit as the moment for agreement on a phased ban on Russian oil.

Brent crude rose as high as $115.69, its highest since March 28, and by 1330 GMT was up 24 cents, or 0.2%, to $114.48. U.S. West Texas Intermediate (WTI) crude, however, slipped 3 cents to $114.17.

"Oil prices have remained near multi-week highs this week, supported by surging gasoline and distillate prices in the U.S., and fears around an EU ban on Russian oil imports remaining in play," said Jeffrey Halley, analyst at brokerage OANDA.

Crude has surged in 2022, with Brent hitting $139, its highest since 2008, in early March as Russia's invasion of Ukraine exacerbated supply concerns.

Oil also gained support from hopes of demand recovery in China as it looks to ease COVID restrictions, analysts said, and from rising geopolitical tension between the EU and Russia following Sweden and Finland's moves to join NATO.

Further support came from figures showing OPEC and allied nations, which include Russia, in April produced far below levels required under a deal to gradually ease record output cuts made during the worst of the pandemic in 2020.

"Ultimately, this is a supply-side story," said Fawad Razaqzada, analyst at City Index. "Unless the OPEC and its allies ramp up production and fast, it is difficult to see how prices can go down meaningfully."

Also in focus are potential further declines in U.S. fuel inventories. Weekly inventory reports are expected to show a rise in crude stocks and declines in inventories of distillates and gasoline. [EIA/S]