Oil prices open higher on EU Russian oil ban, end of Shanghai lockdown

© Reuters. FILE PHOTO: Pump jacks operate at sunset in an oil field in Midland, Texas U.S. August 22, 2018. REUTERS/Nick Oxford

SINGAPORE (Reuters) - Oil prices rose in early Asian trade on Wednesday after European Union leaders agreed to a partial and phased ban on Russian oil and China ended its COVID-19 lockdown in Shanghai.

Brent crude for August delivery was up 78 cents, or 0.7%, at $116.38 a barrel at 0037 GMT.

The front-month contract for July delivery expired on Tuesday at $122.84 a barrel, up 1%.

U.S. West Texas Intermediate (WTI) crude rose 63 cents, or 0.6%, to $115.30 a barrel.

Both benchmarks ended the month of May higher, marking the sixth straight month of rising prices.

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 sanction yet on Moscow since the invasion of Ukraine three months ago, which Moscow calls a "special military operation".

Once fully adopted, sanctions on crude will be phased in over six months and on refined products over eight months. The embargo exempts pipeline oil from Russia as a concession to Hungary.

"However, with Germany and Poland already confirmed they won’t be buying Russian oil via pipeline or sea, the total effect would be to cut 90% of Russian crude sales to the EU by year’s end," analysts from ANZ Research said in a note.

In China, Shanghai's draconian COVID-19 lockdown ended at midnight on Wednesday morning after two months, prompting expectations of firmer fuel demand from the country.

Capping gains were reports that some producers were exploring the idea of suspending Russia's participation in the OPEC+ production deal.

While there was no formal push for Organization of the Petroleum Exporting Countries to pump more oil to make up for any potential Russian shortfall, some Gulf members had begun planning for an output increase sometime in the next few months, the Wall Street Journal reported, citing OPEC delegates.

"The anticipation of more supply hitting the market, even after cutting Russia out, could be fueling some of this sell-off as oil gave up its post-EU embargo bounce," said Stephen Innes, managing partner at SPI Asset Management, in a note.

U.S. crude oil production rose in March by more than 3% to the highest since November, according to a monthly report from the U.S. Energy Information Administration on Tuesday.