Multi-Month Highs On Prospect Of EU Sanctions, Improvements In Chinese COVID Situation

WTI is ~+$3.00 and Brent is ~+$0.90 at typing, operating a little below their respective 12 and 10-week highs made earlier in the session. Both benchmarks have caught a bid as EU leaders announced in-principle agreement to cut over two-thirds of all oil imports from Russia by end-22 (~90% when factoring in separate German and Polish commitments to cut Russian crude supplies), sending crude to levels last witnessed around mid-March.

• Turning to China, participants are eyeing the planned re-opening of Shanghai on Wednesday, where most residents (~22.5mn out of the city’s 25mn total pop.) will be allowed to leave their homes and drive their cars after two months of lockdowns.
• Zooming out, Chinese authorities reported 97 fresh COVID cases nationwide for Monday, the first time the national daily case count has come in below 100 since Mar 2. Well-documented worry re: the nation’s COVID-zero strategy remains evident however, with little sign that officials are looking to dial back the strategy ahead of the Chinese Communist Party’s (CCP) 20th Party Congress scheduled for the second half of ‘22.
• Elsewhere, the U.S. “summer driving season” has kicked off, although record high gasoline prices in the country have continued to drive debate over the extent of demand destruction, raising expectations from some quarters re: a smaller-than-expected rise in fuel demand.
• Looking ahead, OPEC+ meets on Thursday, although RTRS source reports have pointed to the group sticking to the previously-mentioned 432K bpd output target increase for July (keeping in mind the group’s well-documented difficulties in hitting production targets).