By Peter Nurse
Investing.com -- Oil prices traded higher Wednesday, continuing the recent positive tone generated by the decision of the European Union to largely ban Russian oil as well as Shanghai ending its COVID-19 mobility restrictions.
By 8:45 AM ET (1245 GMT), U.S. crude futures traded 1.5% higher at $116.42 a barrel, while the Brent contract rose 1.7% to $117.55 a barrel.
U.S. Gasoline RBOB Futures were up 2.9% at $4.0312 a gallon.
European Union leaders announced earlier this week that they had agreed to cut 90% of oil imports from Russia by the end of this year, with the deal exempting pipeline oil from Russia as a concession to Hungary in particular, as well as a couple of other landlocked Central European states.
Adding to the positive news for crude prices was the decision of Shanghai, China’s commercial hub and largest city, to end its strict COVID-19 lockdown, prompting expectations of firmer fuel demand from the largest importer of crude in the world.
“The risk for the market now is that market momentum will carry the price of WTI into new all-time high territory and spark another wave of speculation,” said Chris Markoch, an analyst at MarketBeat.com, a financial information company.
“In that scenario, WTI could easily move up into the $150 to $200 range.”
Capping the gains is a report from the Wall Street Journal which suggests the solidarity of the ‘OPEC+’ alliance is starting to fray.
The newspaper reported on Tuesday that some Organization of Petroleum Exporting Countries members are considering ‘exempting’ Russia from the production deal, given it’s struggling to maintain output and exports in the face of increasing sanctions.
This suggests the group’s senior members--Saudi Arabia and the UAE are the two with spare capacity--are uncomfortable with a level of prices that will cause demand destruction and accelerate the shift away from oil.
“This potentially opens the door for other OPEC+ members to increase output more aggressively,” said analysts at ING, in a note. “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.”
OPEC+ is set to hold its monthly meeting on Thursday.
The American Petroleum Institute’s data on U.S. stockpiles are due at 4:30 PM ET (2030 GMT), a day later than usual due to the Memorial Day holiday.