Oil price tops $121 as China lifts COVID-19 restrictions

Oil prices topped $121 a barrel on Monday, a high in more than two months, as China eased COVID-19 restrictions and traders anticipated a European Union deal to ban imports of Russian crude. Trading activity was light due to a US holiday.

The July Brent crude futures contract, due Tuesday, settled up $2.24, or 1.9%, at $121.67 a barrel. US West Texas Intermediate (WTI) futures gained $1.99, or 1.7%, to $117.06 a barrel, extending last week’s solid gains.

“One of the reasons given for this is the imminent lifting of coronavirus restrictions in Shanghai, which is raising hopes that oil demand will pick up again in China.”, Commerzbank analysts noted in a note to clients.

Shanghai announced the end of its two-month COVID-19 lockdown, allowing the vast majority of people in China’s largest city to leave their homes and drive their cars from Wednesday.

Meanwhile, the EU met, Monday and Tuesday, to discuss a sixth package of sanctions against Russia for its invasion of Ukraine, actions that Moscow describes as “special military operation”.

“Europe has been haggling over this for almost a month, but more and more the market is pricing (more sanctions) as a risksaid Daniel Ghali, senior commodity strategist at TD Securities.

EU countries failed to agree on a ban on Russian oil imports, despite last-minute haggling, but the leaders of the 27 EU countries will approve an oil embargo in principle, according to the draft agreement. the conclusions of a summit, leaving the practical details and difficult decisions for later.

A new ban on Russian oil would strain a crude market that is already under severe supply pressure, amid rising demand for gasoline, diesel and jet fuel ahead of the peak summer season. in the United States and Europe.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, will meet on Thursday to reject calls from the West to speed up output growth. They will maintain existing plans to increase their production target in July by 432,000 barrels a day, six OPEC+ sources told Reuters.

With information from Reuters