Oil prices fell on Monday, paring early gains as investors profited from a rise in the previous session, albeit overshadowed by supply scares as the European Union readies a ban to import Russian crude and with a limited increase in production from OPEC.
Brent crude futures were down US$1.66, or 1.5%, at US$109.89 a barrel at 0356 GMT, while US West Texas Intermediate (WTI) crude futures ) fell US$1.55, or 1.4%, to US$108.94 a barrel.
Both benchmarks, which jumped about 4% last Friday, earlier soared more than US$1 a barrel, with WTI hitting its highest level since March 28 at US$111.71.
“Investors recouped profits after a sharp rise last Friday,” said Naohiro Niimura, partner at Market Risk Advisory.
“Yet with a planned EU ban on Russian oil and a slow increase in OPEC production, oil prices are expected to remain close to current levels, near $110 a barrel, until ‘They’re going down at the end of this year due to weakening global demand,’ he said.
The European Union aims to agree a phased embargo on Russian oil this month despite concerns over supplies in Eastern Europe, four diplomats and officials said on Friday, rejecting suggestions of delay or watering down of the proposals.
Last week, Moscow imposed sanctions on several European energy companies, sparking supply concerns.
Elsewhere, OPEC+ – the Organization of the Petroleum Exporting Countries (OPEC) and its allies including Russia – has exceeded previously agreed plans to increase production due to underinvestment in some members’ oil fields. OPEC and, more recently, Russian production losses.
OPEC’s latest monthly report showed its production in April rose by 153,000 barrels per day (bpd) to 28.65 million bpd, lagging the 254,000 bpd hike authorized by OPEC under the OPEC+ agreement.
Adding to the pressure, China processed 11% less crude oil in April than a year earlier, with daily throughput falling to the lowest since March 2020 as refiners scaled back operations on weaker demand due to widespread Covid-19 lockdowns.
Meanwhile, U.S. gasoline futures hit a record high again on Monday as falling inventories stoked supply concerns.
“Oil prices will remain bullish, especially the WTI short-term contract, as U.S. gasoline prices continued to rise amid falling petroleum product imports from Europe. “, said Kazuhiko Saito, chief analyst at Fujitomi Securities.