On Wednesday, oil prices extended their rally as top importer China ended a lockdown in Shanghai, supporting prospects for higher demand.
The US West Texas Intermediate futures gained 1.16% or 1.31 points to $116.05 per barrel. Likewise, Brent crude contracts advanced 1.35% or 1.53 points to $117.12 per barrel. Accordingly, both benchmarks marked the sixth straight month of rising prices.
Financial hub Shanghai lifted major pandemic restrictions today after two months, supporting the current upward movement of oil futures. The city recorded 29 new cases on Monday, notably lower than the 20,000 cases a day in April.
The previous citywide lockdown was under Beijing’s zero-Covid policy. The strategy aims to quickly slow new outbreaks by carrying out mass testing and sending infected people to quarantine centers.
However, the highly cautious measure hampered the country’s operations as most factories and establishments closed.
Underscoring the market tightness, European leaders agreed to temporarily halt 90.00% of oil imports from Russia by the end of this year. Once fully adopted, sanctions on crude will persist for over six months and on refined products for over eight months.
Subsequently, the embargo exempted pipeline oil from Moscow as a consideration to the concern of Hungary.
Oil group OPEC+ considers suspending Russia
Meanwhile, a possible downside for oil prices is the potential suspension of Russia from a production deal of OPEC+. The group includes members of the Organization of the Petroleum Exporting Countries and their allies.
The cartel worried about the growing economic pressure on Kremlin and its ability to pump more crude to cool surging prices.
Capping oil gains, the US Energy Information Administration reported that crude production rose in March. The latest result edged up by more than 3.00%, hitting its highest level since November of 2021.
Investors now look forward to the release of the American Petroleum Institute’s data on US stockpiles later this day.