Crude prices up on expectations of new EU sanctions against Russia

Brent prices built some risk premium on Monday with the first nearby contract trading just below the $110/b mark this morning, mainly supported by prospect of tougher sanctions against Russia for alleged atrocities during its war in Ukraine. French President Macron notably called for a ban on Russian coal and oil imports yesterday morning. A further increase in Saudi Aramco’s official selling price (OSP) for its Arab Light crude for Asian refiners to a record premium of $9.35 a barrel above the Oman/Dubai regional benchmark may have also played into the bullish sentiment.

Note that the diesel shortage is far from being resolved in Europe with the Diesel crack to Brent still close to record highs reached in March and no clear indication that refineries are ramping up Diesel production amid maintenances and Covid-linked capacity closures. But the impact of high Diesel prices on economic activity could be significant in the long run given its intensive usage in the industrial sector.