While EU nations failed to agree on a deal on Sunday on a revised sanctions package that may include a Russian crude ban to punish Moscow for its war in Ukraine, talks will continue during the week. Hungary is so far refusing to back a compromise despite proposals aimed at ensuring its oil supplies. An EU official said a deal is still possible in the coming days as leaders meet.

Brent crude is on course for a sixth straight monthly climb that would be the longest such run in more than a decade. The advance has been driven by the fallout from war in Europe, as well as increased demand as more economies return from Covid-related restrictions. In the US, the summer driving season kicked off at the weekend with retail gasoline prices at a record.

“The market is certainly taking a glass-half-full approach today,” said Daniel Hynes, senior commodities strategist at Australia & New Zealand Banking Group Ltd. The market is tightening without any new EU sanctions ahead of the peak-driving season, which will boost demand even further, he said.

China’s dogged adherence to its Covid Zero policy at all costs – epitomised by Shanghai’s lockdown that began in late March and restrictions elsewhere –have sapped energy demand, and an easing would help to support global consumption. Administration officials have both warned of the economic damage stemming from the curbs, and pledged support to offset the impact.

Demand in China is “difficult to forecast given the risks of further lockdowns,” said Hynes.“But I suspect we’ve seen the worst already.”

The oil market is steeply backwardated, a bullish pattern marked by near-term prices trading at a premium to longer-dated ones. Brent’s prompt spread – the difference between its two nearest contracts – was $3.66 a barrel on Monday, up from $1.34 a barrel three weeks ago.

The surge in energy prices has contributed to a sharp pick-up in the pace of inflation, spurring central bankers to move toward tighter monetary policy. Data this week will likely show record price gains in European economies. BM