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Oil Prices Nudge Higher on EU's Russian Oil Ban, End of Shanghai Lockdown

Oil Prices Nudge Higher on EU's Russian Oil Ban, End of Shanghai Lockdown

Wednesday, 1 June, 2022 - 05:15
Oil drills are pictured in the Kern River oil field in Bakersfield, California November 9, 2014. REUTERS/Jonathan Alcorn/File Photo

Oil prices gained slightly on Wednesday after European Union leaders agreed to a partial and phased ban on Russian oil and as China ended its COVID-19 lockdown in Shanghai.

Brent crude for August delivery was up 28 cents, or 0.2%, at $115.88 a barrel at 0338 GMT. The contract settled down 1.7% on Tuesday, Reuters reported.

The front-month contract for July delivery expired on Tuesday at $122.84 a barrel, up 1%.

US West Texas Intermediate (WTI) crude rose 30 cents, or 0.3%, to $114.97 a barrel.

Both benchmarks ended May higher, marking the sixth straight month of rising prices.

EU leaders agreed in principle on Monday to cut 90% of oil imports from Russia by the end of this year, the bloc's toughest sanctions yet on Moscow since the invasion of Ukraine three months ago, which Moscow calls a "special military operation".

Once fully adopted, sanctions on crude will be phased in over six months and on refined products over eight months. The embargo exempts pipeline oil from Russia as a concession to Hungary and two other landlocked Central European states.

In China, Shanghai's strict COVID-19 lockdown ended on Wednesday after two months, prompting expectations of firmer fuel demand from the country.

Capping gains were reports that some producers were exploring the idea of suspending Russia's participation in a production deal of OPEC+, a grouping of Organization of the Petroleum Exporting Countries members and their allies, on expectations such a move would increase supply.

"The full reopening of Shanghai from COVID-19 restrictions may boost sentiment at the periphery, but the possible exemption of Russia by OPEC, from the output agreement, is the bigger story," said Jeffrey Halley, senior market analyst at OANDA.

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