NEW YORK, May 26 (Reuters) - Oil prices climbed about 3% to
a two-month high on Thursday on signs of tight supply ahead of
U.S. summer driving season, as the European Union (EU) wrangled
with Hungary over plans to ban crude imports from Russia over
its invasion of Ukraine.
Traders also noted oil prices followed a rise in equities
and some weakening of the U.S. dollar against a basket of
currencies, which makes oil cheaper when purchased in other
Brent futures rose $3.37, or 3.0%, to settle at
$117.40 a barrel, while U.S. West Texas Intermediate (WTI) crude
rose $3.76, or 3.4%, to settle at $114.09.
After rising for six days in a row, Brent closed at its
highest since March 25. WTI settled at its highest since May 16.
"Crude prices rose as a tight oil market was going to remain
in place given the start of the summer driving season was going
to keep a downward trajectory for U.S. stockpiles," said Edward
Moya, senior market analyst at data and analytics firm OANDA.
Prices drew support from a big weekly drawdown in U.S. crude
inventories, reported on Wednesday.
"The fundamental backdrop ... is getting price supportive
... and will turn even more bullish once the EU sanctions on
Russian oil sales are endorsed by all parties involved," PVM
Oil's Tamas Varga said.
European Council President Charles Michel said he was
confident an agreement can be reached before the council's next
meeting on May 30.
Hungary remains a stumbling block, as EU sanctions require
unanimous support. Hungary is pressing for about 750 million
euros ($800 million) to upgrade its refineries and expand a
pipeline from Croatia.
Even without a formal ban, much less Russian oil is
available as buyers and trading houses have avoided suppliers
from the country.
Russia's oil production should decline to 480-500 million
tonnes this year from 524 million tonnes in 2021, state-run news
agency RIA reported, citing Deputy Prime Minister Alexander
OPEC+ meets on June 2 and is expected to stick to last
year's deal to raise July output targets by 432,000 barrels per
day, six OPEC+ sources told Reuters, rebuffing Western calls for
a faster increase to control prices.
Other factors also are supporting oil prices.
"Shanghai is preparing to reopen after a two-month lockdown,
while the U.S. peak driving season begins with the Memorial Day
weekend," said Sugandha Sachdeva, vice president of commodities
research at Religare Broking. The United States celebrates
Memorial Day on Monday.
The U.S. government confiscated an Iranian oil cargo held on
a Russian-operated ship near Greece and will send the cargo to
the United States aboard another vessel.
Britain, meanwhile, announced a 25% windfall tax on oil and
gas producers' profits, alongside a 15 billion pound ($18.9
billion) package of support for households struggling to pay
Hungary announced new windfall taxes worth 800 billion
forints ($2.19 billion) on "extra profits" earned by banks,
energy companies and other firms.
($1 = 0.9348 euros)
($1 = 0.7942 pounds)
($1 = 365.7200 forints)
(Additional reporting by Ahmad Ghaddar in London, Sonali Paul
in Melbourne and Mohi Narayan in New Delhi; Editing by
Marguerita Choy and David Gregorio)