Oil prices surged yesterday after European Union (EU) leaders reached a deal to ban 90% of Russian crude. The deal will take full effect by the end of the year, but Hungary and two other landlocked European states will get exemptions for the pipeline imports they rely on. Roughly 36% of the EU’s oil imports come from Russia.
By the afternoon, however, oil prices gave up gains on a report that some producers are exploring the idea of suspending Russia’s participation in an OPEC+ production deal. While there was no formal push for OPEC to pump more oil to make up for any potential loss of Russian oil, some Gulf members have reportedly started planning for an output increase sometime in the next few months.
Oil prices ended at $116 a barrel after nearly touching $120 a barrel, but were still up 9% for the month of May, marking the sixth straight month of gains. Also helping boost prices was China’s reopening from lockdowns related to the pandemic, which is expected to boost demand.
OPEC and non-OPEC countries are scheduled to discuss the next phase of production policy at a meeting on Thursday.
"OPEC and OPEC+ members are not likely to raise production output anytime soon, especially given how sticky oil prices have been above the $110 per barrel level. Prices above $50 per barrel are pure profit for state-owned oil companies, so doing anything to bring prices down is not in their interest," stated Caleb Silver, Editor-in-Chief of Investopedia.