(Investing.com) – Oil was up on Tuesday morning in Asia after the European Union (EU) agreed to reduce oil imports from Russia by the end of 2022. The sanctions are fueling worries of an already-strained tighter market amid rising fuel demand ahead of the summer driving season in the U.S. and Europe.
Brent oil futures jumped 1.16% to $118.97 by 12:07 AM ET (4:07 AM GMT), with futures for July expiring on Tuesday and the more active August contract rose 33 cents to $117.93. WTI futures rose 0.93% to $118.27, up $2.24 from Friday's close.
There was no settlement on Monday due to Monday’s public holiday in the U.S.
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Both Brent and WTI futures have climbed to their highest in over a decade in 2022 and are up more than 55% in the year to date.
The EU agreed in principle to cut 90% of oil imports from Russia by the end of 2022, managing to resolve a deadlock with Hungary over the bloc's toughest sanction yet on Russia over its invasion of Ukraine on Feb. 24.
However, some investors said oil price gains could be muted as the market had already priced in the supply constraints.
Almost every EU member was on board with the ban, suggesting the market was "already pricing in EU self-sanction and significantly less Russian oil flowing to Europe this year", SPI Asset Management Managing Partner Stephen Innes told Reuters.
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"I think the market is pricing in some more Asia demand via China; however, the glaring concerns are the skyrocketing petrol prices at the pump that could lead to some driving season demand destruction.”
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Fuel demand in China is expected to pick up after the country’s easing of COVID-19 curbs. Shanghai announced an end to its two-month-long lockdown and will allow the vast majority of its population to leave their homes and drive their cars from Wednesday.
On the production side, the Organization of the Petroleum Exporting Countries and allies (OPEC+), is set to stick to 2021's deal at its meeting on Thursday, with a modest July output hike by 432,000 barrels per day, according to six OPEC+ sources.
The cartel is rebuffing Western calls for a faster increase to lower surging prices, with some member countries maintaining that the oil market is balanced and that the recent price hikes are not related to fundamentals.