Oil Prices Rise as EU Sanctions Squeeze Russian Crude Supply

Oil prices climbed on Friday due to the European Union’s latest sanctions on Russia, and rising fuel consumption, offsetting concerns of a future supply glut. Brent crude, the global benchmark, hovered near $70 per barrel after gaining 1.5% on Thursday, extending a rally that began in early May.

The EU’s 18th sanctions package introduced a lower price cap on Russian crude and targeted refined products, including sanctioning an Indian refinery co-owned by Russia’s Rosneft PJSC. The move disrupts a key fuel export route to Europe, which had increasingly relied on Indian imports processed from Russian oil.

Strong demand for diesel, particularly in Europe and the U.S., continues to tighten the refined fuel market. Despite concerns of oversupply later in the year, inventories have grown mainly in non-price-setting regions, limiting their effect on global benchmarks, according to analysts at Morgan Stanley and Goldman Sachs.

Futures in crude and gasoil both remain in backwardation, a structure where near-month prices are above those of later months, a sign of continued supply tightness. That remains the case even as OPEC+ is unwinding production cuts rapidly, a sign that demand strength and geopolitical risk continue to underpin oil markets.

Risk-on sentiment also returned as better-than-expected U.S. economic news drove equities higher, supporting oil prices further.