Crude oil gained as traders weigh demand from China as the country deals with accelerating number of COVID-19 cases each day which has lead to movement curbs in Shanghai.
The U.S. West Texas Intermediate futures rose around 2% to trade above $96 a barrel while the Brent is also touched above 2% trading over $100 a barrel.
Brent maintained in bullish backwardation with near-dated contracts more expensive than the later dated ones.
Shanghai has eased lockdowns in some housing complexes with authorities signaling reimposing curbs if cases jumped. The southern city of Guangzhou is also taking measures to prevent a flare-up. Oil has now almost given up all its gains since Russia’s invasion of Ukraine.
Meanwhile crude oil prices are supported as the Organization of the Petroleum Exporting Countries (OPEC) said that some 7 million barrels per day of Russian oil and other liquids exports could be lost due to sanctions or voluntary actions, and that it would be impossible to replace those volumes.
The European Union is drafting proposals for an EU oil embargo on Russia in the wake of its invasion of Ukraine, some foreign ministers said on Monday.
“The oil market is still vulnerable to a major shock if Russian energy is sanctioned, and that risk remains on the table,” wrote Edward Moya, a senior market analyst with OANDA.
“Oil prices will play tug-of-war here as crude inventories remain low, but energy traders will struggle to shake-off these steady announcements of new COVID restrictions in China,” he added.
International Energy Agency members are planning to release some 240 million barrels over the next six months to calm down the volatile market. Among 240 million barrels 180 million will be released from U.S. stockpiles at a rate of 1 million bpd starting in May.