New 3% rally led oil to a two-month high (upd)

LAST UPDATE: 22.31

Oil prices have been at a two-month high, hovering around $ 120 as fears of a further squeeze in supply intensify.

The global benchmark, Brent oil delivery in Julyclosed at $ 117.40 a barrel, up $ 3.37 or 3%.

On the other side of the Atlantic, the American WTI crude delivery in July gained $ 3.76 or 3.4%, closing at $ 114.09 a barrel.

Brent price moved higher for the sixth consecutive session and recorded the highest closing since March 25, while the WTI reached its highest level since March 23.

As PVM Oil analyst Tamas Varga points out, the baseline scenario is that prices will be supported in the run-up to the US road season and will move even higher when European sanctions on Russian crude are adopted.

After all, European Council President Charles Michel appeared today confident that an agreement could be reached before the next Council meeting on 30 May.

For his part, German Vice Chancellor and Economy Minister Robert Habeck said the EU could reach an agreement on the embargo within days or turn to “other means”.

Hungary remains an obstacle to enforcing the European embargo, as EU sanctions require a unanimous decision. Budapest is pushing for about 750m euros ($ 800m) to upgrade its refineries and extend a pipeline from Croatia.

However, even without the European embargo, very small quantities of Russian oil are now available on the market as most buyers and traders avoid the country’s reserves.

According to the Deputy Prime Minister of Russia, Alexander Novak, Russia’s oil production will be reduced this year to 480 to 500 million tons from 524 million tons in 2021, as reported by the Russian agency RIA.

At the same time, OPEC +, which meets on June 2, is expected to stick to its policy of slightly increasing production that it decided last year, raising its target by just 423 thousand barrels per day in July, according to Agency sources who spoke to Reuters.

At the same time, prices are supported by other factors, such as the fact that after two months of lockdown Shanghai is preparing to lift the restrictions, while the peak of the driving season in the US begins with the Memorial Day weekend, says Sugandha Sachdeva, vice president Religare Broking.

“All variables indicate further gains for oil prices in the coming period,” he said.

It is noted that the opposite course is followed by the prices of natural gas in Europe, which today fell in Amsterdam (TTF) to 85 euros per megawatt hour for the June contract, with losses of 3.5%.