Oil prices climbed above $120 a barrel on Monday, hitting their highest in more than two months, as traders waited to see whether the European Union would reach an agreement on banning Russian oil imports.

The Brent crude futures contract for July, which will expire on Tuesday, was up 69 cents, or 0.6 per cent, at $120.12 a barrel at 1310 GMT. The August Brent contract , which is more active, rose 85 cents, or 0.7 per cent, to $116.41 a barrel.

US West Texas Intermediate crude futures jumped 74 cents, or 0.6 per cent, to $115.81 a barrel, extending solid gains made last week.

The EU is due to meet on Monday and Tuesday to discuss a sixth package of sanctions against Russia for its invasion of Ukraine, actions which Moscow calls a “special military operation”.

“EU Russian oil import ban is still a work in progress and if it gets over the line this week, expect supplies to tighten again,” said Jeffrey Halley, a senior market analyst at OANDA.

“As such, the risks are now increasing of a move towards the post-Ukraine highs we saw in February.”

EU governments failed to agree on an embargo on Russian oil on Sunday but will continue talks on a deal to ban seaborne deliveries while allowing deliveries by pipeline, ahead of the summit on Monday afternoon, officials said.

“It’s still quite difficult for the European group to reduce its energy dependency on Russia in the near term. That said, an immediate import ban is less possible, and demand may keep oil prices afloat in the near term,” said Leona Liu, analyst at Singapore-based DailyFX.

Windfall tax

The government is not looking to impose any new tax on windfall gains that oil and gas producers earned from shooting energy prices, India’s top producer ONGC said on Monday.

ONGC and Oil India Ltd reported bumper profits in the March quarter (when international prices soared to a near 14-year high of $139 per barrel) and record earnings in 2021-22, triggering talks of the government slapping a windfall tax.

“We have not received any communication on this,” ONGC chairman and managing director Alka Mittal told a news conference here.

Last week, Oil India Ltd (OIL) Chairman SC Mishra stated the same.

"The government has been conveying to us to go aggressively on (oil and gas) exploration and production spending so as to augment domestic output and cut import reliance," Mittal said.