Oil Bull Run Continues As EU Agrees To Ban Most Russian Oil

Oil prices extended a bull run on Tuesday after the European Union agreed to a partial and phased ban on Russian oil and China decided to lift some COVID-19 restrictions amid rising demand before the peak U.S. and European summer driving season.

Brent crude for July, which expires on Tuesday, rose $2.31, or 1.9%, to $123.98 a barrel by 1338 GMT, after earlier rising to $124.64 - its highest since March 9. The August contract hit a high of $120.80.

The premium of August-loading Brent contracts over a six-month spread hit a nine-week high at close to $15 a barrel, indicating current supply tightness.

U.S. West Texas Intermediate (WTI) crude was trading at $119.18 a barrel, up $4.11 in a fourth consecutive session of gains, up 3.6% from Friday's close, hitting its highest since March 9. There was no settlement on Monday's U.S. holiday.

Both July-loading contracts are set to end the month of May with a sixth straight month of rising prices.

EU leaders agreed in principle to cut 90% of oil imports from Russia, the bloc's toughest sanction yet on Moscow since the invasion of Ukraine three months ago.

Once fully adopted, sanctions on crude will be phased in over six months and on refined products over eight months. The embargo exempts pipeline oil from Russia as a concession to Hungary.

"As two thirds of the Russian crude oil exports are seaborne around 1.5 million barrels per day (bpd) of oil will need to be replaced by the EU," PVM analyst Tamas Varga said.

"This volume is actually closer to 2.1-2.2 million bpd as both Poland and Germany are planning to phase out pipeline purchases by the end of the year."

On the production side, OPEC+ is set to stick to a modest July output hike of 432,000 bpd, OPEC+ sources said.

Oil prices found further support as Shanghai announced an end to its COVID-19 lockdown, and will allow people in China's largest city to leave their homes and drive their cars from Wednesday.