Hungary's requirements seem to bode well for an agreement on Russian bans: File Image/Pixabay
Shanghai announcing an end to its two-month-long Covid-19 lockdown sparked hope that demand would soon recover in China, and this coupled with optimism about the European Union reaching an agreement to ban oil imports from Russiacaused oil prices on Monday to rise by almost 2 percent.
After it was learned that the Chinese government would allow the vast majority of people in China's largest city to leave their homes and drive their cars from Wednesday, the Brent contract for July, which expires Tuesday, settled up $2.24, or 1.9 percent, at $121.67 per barrel.
West Texas Intermediate was up $1.99, or 1.7 percent, to $117.06 per barrel at 18.03 GMT.
Daniel Ghali, TD Securities
Europe has been haggling about this for the better part of a month
Meanwhile, the EU is meeting on Monday and Tuesday to discuss a sixth package of sanctions against Russia for its invasion of Ukraine, and this caused Daniel Ghali, senior commodity strategist at TD Securities, to note that "Europe has been haggling about this for the better part of a month, but increasingly the market is pricing (additional sanctions) in as a risk."
Viktor Orban, prime minister of Hungary, the most vocal opponent of the sanctions, said if the EU grants him exemptions for crude oil via pipelines and access to maritime shipments in emergencies if pipelines are blocked, then "this is the guarantee that we need."
But purely in terms of efficacy, it remains questionable whether bans against Russia are truly hurting Moscow as intended: Bloomberg on Monday reported that the former Soviet Union's seaborne crude exports are flowing unabated, with overall shipments edging higher in the seven days to May 27 (a total of 34 tankers loaded 25 million barrels in total, up 4 percent).
Also, Rosneft said it plans to pay a record-high annual dividend of 41.66 rubles on the back of soaring prices, following an announcement last week by Gazprom that it proposes its highest ever payout after benefiting from a supply crunch in Europe.
In related oil news on Monday, France said Iran must release the two Greek oil tankers seized in the Persian Gulf last week by the Islamic Revolutionary Guard Corps because of what of what it called "violations"; one of the ships, the Delta Poseidon, is a Suezmax capable of carrying more than 1 million barrels of crude.
As for oil trading in the near future, ING analysts Warren Patterson and Wenyu Yao wrote in a note that "Tightness in the refined products market continues to prove supportive for crude oil prices, as healthy refinery margins should see refiners maximize their run rates."