Crude oil is the most expensive in three months

Oil prices rose by more than 1 percent on Tuesday, reaching USD 119 per barrel of the WTI variety and USD 123 per barrel of the Brent variant. Crude oil costs the most today since early March, when prices soared in response to Russia's aggression in Ukraine. The latest raise may also be associated with the ongoing war in Ukraine.

Sanctions mostly priced

As part of the sanctions imposed on Russia, European Union leaders reached an agreement to ban 90% of imports. Russian oil by the end of 2022. Yesterday's EU decision resolves the stalemate on Moscow's most severe sanction to date and opens the way to introducing other elements of the sixth package of sanctions, including the exclusion of the largest Russian bank (Sberbank) from the SWIFT. Some analysts, however, suggest that the hikes may be small as the market has already priced in this move.

Nevertheless, it was precisely after the announcement of the EU agreement that the prices of the raw material returned to their highs, increasing in total for six months in a row. In May alone, the scale of the increases reaches 15%, and the barrel of the WTI variety has increased by nearly 60% since the beginning of the year. Including therefore, in the United States, a gallon of gasoline already costs more than $ 4, which is more than twice as much as six months ago.

China is recovering from further restrictions, and production is limping

However, other drivers of price increases emerge. China's oil demand is likely to increase as Beijing and Shanghai have already eased another wave of covid restrictions. Meanwhile OPEC + is expected to stick to its policy of moderate output growth at its meeting on Thursday, rejecting Western calls to increase production in order to lower prices. Nay! OPEC + does not even implement its own production assumptions. The shortage turned out to be significant in April, with production declining for the second consecutive month to be 2,4 million barrels / day lower than the group's total target of 39,94 million barrels / day this month.