Oil prices drop on profit-taking, supply fears linger

Oil prices slipped on Monday, giving up earlier gains as investors took profits after a surge in the previous session, but global supply fears loomed with the European Union preparing to phase in a ban on imports from Russia.

Brent crude futures were down 64 cents, or 0.6 per cent, at $110.91 a barrel at 0137 GMT, while US West Texas Intermediate (WTI) crude futures dropped 60 cents, or 0.5 per cent, to $109.89 a barrel.

Both benchmarks, which jumped about 4 per cent last Friday, earlier increased by more than $1 a barrel, with WTI reaching its highest since March 28 of $111.71.

"Oil markets are expected to gain this week as a pending ban by the European Union on Russian oil will further tighten global supplies of crude and fuels," said Kazuhiko Saito, chief analyst at Fujitomi Securities Co Ltd.

The EU still aims to agree on a phased embargo on Russian oil this month despite concerns about supply in eastern Europe, four diplomats and officials said on Friday, rejecting suggestions of a delay or watering down proposals.

Last week, Moscow - which calls its actions in Ukraine "a special military operation" - slapped sanctions on several European energy companies, causing worries about supplies.

Meanwhile, US gasoline futures set a fresh all-time high again on Monday as falling stockpiles fuelled supply concerns.

"Oil prices remained bullish, especially WTI's near-term contract, as US gasoline prices continued to rise amid weaker imports of petroleum products from Europe," Fujitomi Securities' Saito said.

On the supply side, US energy firms in the week to May 13 added oil and natural gas rigs for an eighth week in a row as high prices and prodding by the federal government prompted drillers to return to the wellpad.

Elsewhere OPEC+ - the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia - has been undershooting previously agreed plans for output increases due to under-investment in oilfields in some OPEC members and, more recently, losses in Russian output.

The latest monthly report from OPEC showed its output in April rose by 153,000 barrels per day (bpd) to 28.65 million bpd, lagging the 254,000 bpd rise that OPEC is allowed under the OPEC+ deal.