Oil prices pulled back Tuesday after The Wall Street Journal reported some members of the Organization of the Petroleum Exporting Countries were weighing exempting Russia from oil-production targets, which would allow other countries to pump more crude.
July Brent crude
rose $1.17, or 1%, to end at $122.84 a barrel on ICE Futures Europe, leaving it up 12.4% for the month.
July natural gas fell
tumbled 6.7% to settle at $8.145 per million British thermal units.
The Journal reported that such an exemption could clear the way for Saudi Arabia, the United Arab Emirates and other OPEC members to pump significantly more crude. Russia is the de facto leader of non-OPEC nations in a bloc known as OPEC+ that agreed last year to slowly unwind, in monthly increments, production cuts put in place following the onset of the COVID-19 pandemic in 2020.
OPEC+ has so far resisted pleas by the U.S. and others to more quickly ramp up production. OPEC+ is set to hold a monthly meeting to discuss its production plans on Thursday.
Oil rose early Tuesday as investors returning from Monday’s Memorial Day holiday were greeted by news that European Union leaders hammered out a deal to punish Russia over its invasion of Ukraine, by cutting its need for the warring nation’s energy assets.
The watered-down embargo covers Russian oil brought in by sea, with a temporary exemption for imports delivered by pipeline, required to bring Hungary on board. The EU said the agreement covers more than two-thirds of oil imports from Russia, and should cut 90% of that country’s crude by the end of this year.
“While the move targets Russian supply, Chinese demand is expected to see tailwinds over the near-term as the country looks to ease some anti-COVID measures that had temporarily dropped demand. China is a key buyer of Russian crude and the world’s largest crude importer overall,” said Robbie Fraser, manager of global research and analytics, at Schneider Electri, in a note.
Shanghai authorities said they would take major steps Wednesday toward reopening after a two-month COVID-19 lockdown in the country’s biggest city. Beijing relaxed pandemic restrictions on Sunday, declaring a recent outbreak under control.
Data released Tuesday showed Chinese factory and service-sector activity improved in May, though overall the gauges still showed a contraction in economic activity as the country has grappled with COVID lockdowns.
The U.S. benchmark’s highest finish in more 11 weeks on Friday came as summer driving season kicked off over the Memorial Day weekend, and inventories remain at low levels. Headed into the holiday, the U.S. average retail price of regular gasoline was $4.59 a gallon), the highest inflation-adjusted (real) price since 2012, according to the U.S. Energy Information Administration.