By Adedapo Adesanya
Oil prices were up on Wednesday as China ended its COVID-19 lockdown in Shanghai, which could bolster demand in an already tight market.
As a result, Brent crude rose 0.65 per cent or 75 cents to sell at $116.30 per barrel, while the United States West Texas Intermediate (WTI) traded higher by 0.48 per cent or 55 cents at $115.20 a barrel.
In China, Shanghai’s strict COVID-19 lockdown ended on Wednesday after two months, prompting expectations of firmer fuel demand.
Shanghai’s 25 million residents can now freely leave home, return to work, use public transport and drive their cars but residents will have to test every 72 hours to take public transport and enter public venues, indicating what may become a new normal in many Chinese cities.
This was further supported by plans by the European Union (EU) to phase a ban on Russian oil imports as a move to curtail its financing of the war in Ukraine.
EU leaders agreed in principle on Monday to cut 90% of oil imports from Russia by the end of this year, the bloc’s toughest sanctions yet since the start of the invasion of Ukraine on February 24.
Analysts noted that if they achieve near what the bloc intends to, Russia is going to lose about 3 million barrels (in daily exports) and not all of that can be diverted.
Despite the EU ban on most Russian oil imports, the Organisation of the Petroleum Exporting Countries and other producers, known as OPEC+ is unlikely to increase production quotas more than planned, according to numerous reports of the past few days.
Pressuring the market, the technical panel of the OPEC+ group reduced its global oil demand forecast for 2022 by 200,000 barrels per day ahead of the alliance’s meeting on Thursday.
The Joint Technical Committee (JTC) held its regular meeting ahead of the meeting of the Joint Ministerial Monitoring Committee (JMMC) that would be followed by the OPEC+ ministerial meeting.
According to a report for the JTC to review, global oil demand is now expected to grow by 3.4 million barrels per day this year, with the geopolitical situation and COVID developments cited as key risks to the forecast.
OPEC+ meets on Thursday, and it is widely expected to rubberstamp its moderate monthly increases in oil production when it decides output levels for July.
Meanwhile, there is no clarity if Russia will be suspended from the alliance yet.
