Oil prices rose on Monday on optimism that China would see significant demand recovery after positive signs that coronavirus pandemic was receding in the hardest-hit areas.
Brent crude rose $1.34, or 1.2%, at $112.89 a barrel at 12:10 p.m. EDT (1710 EDT) 1342 GMT, while U.S. West Texas Intermediate (WTI) crude rose $2.22, or less than 0.1%, to $$112.71 a barrel.
Shanghai aims to reopen broadly and allow normal life to resume for the city’s 25 million people from June 1, a city official said on Monday, after declaring that 15 of its 16 districts had eliminated cases outside quarantine areas.
However, it is estimated that 46 cities in China are under lockdowns, hitting shopping, factory output and energy usage.
“We are seeing a lot of signals that demand will start returning in that region, supporting higher prices,” said Bob Yawger, director of energy futures at Mizuho.
In line with the unexpected industrial output decline, China processed 11% less crude oil in April, with daily throughput the lowest since March 2020.
U.S. gasoline futures set an all-time high again on Monday as falling stockpiles fuelled supply concerns.
“Oil prices will remain bullish, especially WTI’s near-term contract, as U.S. gasoline prices continued to rise amid weaker imports of petroleum products from Europe,” said Kazuhiko Saito, chief analyst at Fujitomi Securities.
Oil prices also found some support as the European Union’s diplomats and officials expressed optimism about reaching a deal on a phased embargo of Russian oil despite concerns about supply in eastern Europe.
Austria expects the EU to agree on the sanctions in the coming days, Foreign Minister Alexander Schallenberg said on Monday.
German Foreign Minister Annalena Baerbock said the bloc would need a few more days to find agreement.
“With a planned ban by the EU on Russian oil and slow increase in OPEC output, oil prices are expected to stay close to the current levels near $110 a barrel,” said Naohiro Niimura, a partner at Market Risk Advisory.