Oil futures ended higher on Wednesday as Shanghai eased its COVID-19 lockdown, signaling increased demand for crude.

Traders were also preparing for a Thursday meeting of the Organization of the Petroleum Exporting Countries and their allies, known as OPEC+, after The Wall Street Journal reported the group was considering exempting Russia from its production targets.

Price action

• West Texas Intermediate crude for July delivery CL00, -1.09% CL.1, -1.04% CLN22, -1.09% rose 59 cents, or 0.5%, to close at $115.26 a barrel on the New York Mercantile Exchange.
  
• August Brent crude BRN00, -0.98% BRNQ22, -0.99%, the global benchmark, gained 69 cents, or 0.6%, to settle at $116.29 a barrel on ICE Futures Europe.
  
• Back on Nymex, July gasoline RBN22, -0.44% jumped 4% to $4.0716 a gallon.
  
• July heating oil HON22, -0.01% shot up 5.3% to $4.143 a gallon.
  
• July natural gas NGN22, -2.29% rose 6.8% to end at $8.696 per million British thermal units.

Market drivers

Shanghai moved to restore full bus and subway service on Wednesday, as well as basic rail connections with the rest of China. Still, more than half a million people in the city of 25 million are still under lockdown or in designated control zones because virus cases are still being detected, the Associated Press reported.

China’s so-called zero-COVID policy has resulted in mass lockdowns, with the shutdown of Shanghai, its largest city and a key commercial hub, credited with keeping a lid on crude prices that remain above $100 a barrel in the wake of Russia’s invasion of Ukraine in late February.

The European Union this week agreed on a plan that imposes a partial embargo on imports of Russian crude.

The Tell: Why India is the big winner as EU’s Russia oil ban redraws energy trade map

But oil futures lost steam late in Tuesday’s session after The Wall Street Journal reported that some OPEC members were considering exempting Russia from the OPEC+ oil-production agreement as sanctions and the EU’s partial import ban undercut the country’s ability to meet its targets.

If agreed, that would clear the way for other producers, including Saudi Arabia and United Arab Emirates, to pump more crude to make up or Russia’s shortfall, the report said.

“This potentially opens the door for other OPEC+ members to increase output more aggressively. However in reality, given that most members have failed to hit their output targets consistently for several months, it will likely be a struggle for the group as a whole to increase output more aggressively,” said Warren Patterson, head of commodities strategy at ING, in a note.

Read: Will OPEC+ fill the supply gap left by Russian oil? Don’t count on it.

marketwatch 06 01 2022