Crude oil futures continued to climb in mid-morning Asian trade May 31, adding to gains of more than $2/b for ICE Brent crude overnight after the EU reached an agreement to ban Russian oil imports.
At 10:48 am Singapore time (0248 GMT), the ICE August Brent futures contract was up $1.07/b (0.91%) from the previous close at $118.67/b, while the NYMEX July light sweet crude contract rose $2.98/b (2.59%) from the May 27 close at $118.05/b.
US markets were closed on May 30 for the Memorial Day holiday.
The deal, which was reached at a European Council summit over May 30-31, is expected to hit some 2.3 million b/d of Russian crude imports within six months while another 1.2 million b/d of refined product imports would cease by the end of the year.
“The sanctions will immediately impact 75% of Russian oil imports. And by the end of the year, 90% of the Russian oil imported in Europe will be banned,” European Council President Charles Michel said in a tweet after a summit meeting.
Analysts said the ban, while a significant milestone for the EU, nonetheless had its effectiveness blunted due to an exception for pipeline crude flows.
“The agreement has been watered down quite a bit from the original proposal,” said ING analysts Warren Patterson and Wenyu Yao in a May 31 note.
“Instead of targeting all Russian crude oil imports, the EU will ban imports of Russian seaborne crude oil over the next 6 months. This would ensure supply to landlocked countries in the [Central and Eastern European countries], which are very dependent on Russian pipeline supplies.”
Nonetheless, the ban is still expected to cause further tightening in an oil market that is already seeing crude and oil product inventories worldwide falling to historically low levels.
“The ongoing supply-demand imbalance is likely to reinforce the tightness in the oil market,” said IG market strategist Yeap Jun Rong.
Dubai crude swaps and intermonth spreads were higher in mid-morning trade in Asia May 31 from the previous close.
The July Dubai swap was pegged at $109.92/b at 10 am Singapore time (0200 GMT), up $1.83/b (1.69%) from the May 30 Asian market close.
The June-July Dubai swap intermonth spread was pegged at $3.46/b at 10 am SGT, up 13 cents/b over the same period, and the July-August intermonth spread was pegged at $2.72/b, up 14 cents/b.
The July Brent/Dubai EFS was pegged at $12.44/b, up 16 cents/b.
Source: Spglobal.com
