Oil Leaps As EU Agrees Russian Crude Ban; U.S. Gas Prices Hit Fresh Record High

An EU ban covering around 90% of Russian crude exports has oil prices on the march Tuesday, with U.S. gasoline prices quoted at a fresh all-time high.

Global oil prices extended recent gains Tuesday after European Union officials reached an agreement to ban all imports of seaborne Russian crude phased-in over the next six months.

The decision, which followed weeks of political horse-trading with Hungarian President Viktor Orban, will exclude the Druzhba pipeline, which feeds energy into land-locked central European states — including Slovakia and the Czech Republic — but effectively cover between 70% and 80% of Russia’s 2.3 million barrels in daily exports to the region. Additional action from Germany and Poland could raise the ban’s effectiveness to around 90%. 

“This move is supportive for prices. However, the market has had a month to digest the potential ban, and so we suspect it is largely priced in already,” said ING’s head of commodity strategy Warren Patterson. “This is reflected in the price action in early trading in Asia this morning.”

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WTI contracts for July delivery, which are tightly linked to U.S. gas prices, were marked $2.01 higher from Friday’s close at $118.87 per barrel. Brent crude contracts for the same month, the global pricing benchmark, were last seen $1.93 higher on the session at $123.60 per barrel.

Global supplies have been further complicated by OPEC’s decision to only modestly increase their monthly output by 432,000 barrels per day, citing a demand slump linked to China’s Covid crisis. 

Traders are also adjusting for the release of 240 million barrels of crude — or more than a million barrels each day between now and the end of the year — following President Joe Biden’s decision to tap the U.S. Strategic Petroleum Reserve in late March and a follow-on agreement from member states in the International Energy Agency 

In the U.S., gas prices hit yet another nominal record high Tuesday with the AAA indicating a nationwide average price at the pump of $4.622 per gallon. 

Exxon Mobil  (XOM) – Get Exxon Mobil Corporation Report shares were marked 1% higher in pre-market trading to indicate an opening bell price of $98.57 each, while its small rivals Chevron  (CVX) – Get Chevron Corporation Report and Occidental Petroleum  (OXY) – Get Occidental Petroleum Corporation Report rose 0.8% and 2.7% respectively. 

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