On signals that the European Union is getting closer to a ban on Russian crude imports, oil climbed for a fourth day, set for its greatest run in a month.
After soaring 18% in the previous three days, West Texas Intermediate reached $114 per barrel in early Asian trade.
When EU leaders gather in Brussels later this week, Josep Borrell, the EU’s foreign policy head, said he expects them to consider, but not necessarily agree, more penalties against Russia.
Crude prices have risen as a result of the issue, as buyers have shied away from Russian shipments and the United States and the United Kingdom have taken steps to prevent acquisitions.
EU, on the other hand, is Russia’s largest customer of oil and fuel, and the Kremlin has warned that any restriction would have a significant impact on the market, particularly in Europe.
When it comes to targeting Russian energy, EU countries are divided. Germany, which depends on Russian crude imports, has so far resisted an embargo, as has Hungary.
Whatever the move, it would have to be approved by all 27 countries, and Europe’s leaders are scheduled to gather on Thursday to discuss the matter.
Analysts at Australia & New Zealand Banking Group Ltd. Daniel Hynes and Soni Kumari said in a report that energy markets “remain on edge as Russia export restrictions continue to build.”
According to them, this is evident in forward curves remaining highly backwardated, a bullish trend in which prompt prices trade above those further out.
Brent’s “prompt spread,” or the difference between its two closest futures, expanded to $3.70 a barrel on Monday due to backwardation.
This is up from $2.86 per barrel on Friday and 41 cents at the beginning of the year.
As it announced an increase in income, Vitol Group, the world’s largest independent oil trader, cautioned that energy costs will keep rising.
“The physical energy markets were already tight as we entered the current crisis,” stated CEO Russell Hardy.
Oil’s rise is fanning already-high inflation in nations throughout the world, making monetary policymakers’ jobs more difficult, including the Federal Reserve’s.
If necessary, Fed Chair Jerome Powell indicated on Monday that the US central bank is prepared to hike interest rates by a half percentage point at its next meeting.