Oil on Russian oil ban from EU, end of Shanghai lockdown

Pump jacks work at sunset in an oil field in Midland, Texas, U.S., August 22, 2018. REUTERS/Nick Oxford

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LONDON, June 1 (Reuters) – Oil prices firmed on Wednesday after European Union leaders agreed to a partial, phased ban on Russian oil and China ended its COVID-19 lockdown. 19 in Shanghai, which could support demand in an already tight market.

Brent crude was up $1.83, or 1.6%, at $117.46 a barrel as of 11:56 a.m. EDT (1556 GMT). U.S. crude West Texas Intermediate gained $1.77, or 1.6%, to $116.45.

Both benchmarks posted gains in May, marking the sixth consecutive month of rising prices.

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“The mood in the oil market seems to be getting more and more bullish,” said Julius Baer analyst Norbert Rucker.

EU leaders agreed in principle on Monday to cut oil imports from Russia by 90% by the end of this year, the bloc’s toughest sanctions since the start of the invasion. Ukraine, which Moscow calls a “special military operation”. Read more

Once fully enacted, the sanctions on crude will be staggered 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.

“We maintain our view that, over time, Russia will be able to redirect most of its exports and set the maximum impact on Russian production at 1.5 million barrels per day,” he said. JP Morgan in a note.

Sources told Reuters that Russian oil companies run by Rosneft (ROSN.MM) plan this month to reopen wells they had closed due to Western sanctions. Read more

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

Two OPEC+ sources said on Wednesday that members had not discussed the idea of ​​suspending Russia from the current oil supply deal, after the Wall Street Journal reported on Tuesday that such a move was under study.

OPEC+ includes members of the Organization of the Petroleum Exporting Countries and their allies led by Russia. The group is due to meet on Thursday to set policy.

Some Gulf members had begun planning for increased production over the next few months, the Wall Street Journal reported, citing OPEC delegates. OPEC+ has been criticized for not increasing production faster to meet rising fuel prices. Read more

An OPEC+ technical committee on Wednesday cut its oil market surplus forecast for 2022 from about 500,000 bpd to 1.4 million bpd, sources said.

U.S. crude oil production rose more than 3% in March to its highest level since November, a U.S. Energy Information Administration report showed on Tuesday. Read more

Analysts polled by Reuters had expected U.S. crude oil inventories to have fallen last week, while gasoline and distillate inventories were expected to have risen. Official government data is expected on Thursday.

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Reporting by Ahmad Ghaddar Additional reporting by Isabel Kua in Singapore Editing by Marguerita Choy and Emelia Sithole-Matarise

Our standards: The Thomson Reuters Trust Principles.

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