Sonali Paul

MELBOURNE (Reuters – Oil prices climbed to two-month highs Monday, as traders waited for the European Union to reach an agreement to prohibit Russian oil. This was ahead of a meeting on a six-pack of sanctions targeting Moscow’s invasion of Ukraine.

Futures rose 46 cents or 0.4% to $119.89 per barrel at 0111 GMT. U.S. West Texas Intermediate crude futures (WTI), meanwhile, increased 60 cents or 0.5% to $115.67 per barrel. This is a solid increase from last week.

Monday and Tuesday are set for a meeting of the EU to consider a sixth round of sanctions against Russia over its invasion in Ukraine. Moscow describes it as an “special operation” that seeks to disarm Russia.

Stephen Innes (SPI Asset Management managing Partner) stated that it was not unreasonable to believe that speculators would position themselves for an oil market rebound after the EU summit.

An additional ban on Russian crude oil would destabilize a supply-demand market already stressed by rising demand for jet fuel and gasoline ahead of peak season in Europe.

The EU’s failed to come to an agreement to embargo Russian oil Sunday. However, the EU will keep working to strike a compromise to allow pipeline deliveries while banning seaborne Russian oil deliveries. Officials stated that this would be ahead of Monday’s summit.

A deal could allow Hungary, Slovakia, and Czechia, to continue receiving their Russian oil through the Druzhba pipe until alternate supplies are arranged.

The market is tightening has been underlined by the Organization of the Petroleum Exporting Countries (OPEC+) and its allies, including Russia. They are expected to rebuff Western requests to accelerate their oil production additions at their meeting on Thursday. Six sources from OPEC+ confirmed to Reuters that the group will continue to increase oil output by 432,000 barrels daily in July.

Oil markets were also in turmoil after Iran said Friday that its navy had taken two Greek tankers as a retaliation for the US’s seizure of Iranian oil from a vessel off Greece’s coast.

Analysts at ANZ Research stated in a note that “this raises the spectre of additional disruptions to oil flow through the Strait of Hormuz,” which carries a third of world’s trade.

As investors reduced their expectations for U.S. rate increases and worries about global recession, oil prices also saw a drop in the U.S. dollars. Importers of oil from other countries will find it less costly to purchase the weaker dollar.