Oil Prices Rise on Demand, Supply Concerns

Oil prices rose on Wednesday on expectations that easing COVID-19 restrictions in China will boost demand and as supply concerns grew.

Brent crude was up 0.65% at $112.66 U.S. per barrel, while U.S. West Texas Intermediate (WTI) crude climbed 1% to $113.52, reversing some of the previous session’s losses.

Hopes of further lockdown easing in China boosted expectations for demand recovery. The country’s authorities allowed 864 of Shanghai’s financial institutions to resume work, sources said on Wednesday, a day after the Chinese city achieved a milestone of three consecutive days with no new COVID-19 cases outside quarantine zones.

The market also saw support from rising supply concerns. Russian crude output in April fell by nearly 9% from the previous month, an internal report from the Organization of the Petroleum Exporting Countries and their allies (known as OPEC+) showed on Tuesday, as Western sanctions on Moscow following its invasion of Ukraine hit the top oil producer.

The price rise is being capped by reports that the U.S. is planning to relax sanctions against Venezuela and allow Chevron Corp (NYSE:CVX) to negotiate oil licenses with Venezuela’s national producer.

U.S. crude and gasoline stocks fell last week, according to market sources citing American Petroleum Institute figures on Tuesday.

For the economic outlook, U.S. Federal Reserve Chairman Jerome Powell on Tuesday said the central bank would ratchet up interest rates as high as needed to stifle inflation that he said threatened the foundation of the economy.