Oil Prices Rise As China Relaxes COVID Controls And Supplies Tighten

China's easing of COVID restrictions and skepticism over the efficacy of a higher production goal by OPEC+ countries contributed to a slight increase in oil prices on Tuesday.

Brent oil futures were up 19 cents, or 0.2 percent , at $119.70 a barrel at 0050 GMT.

Futures for U.S. West Texas Intermediate (WTI) oil increased 25 cents, or 0.2%, to $118.75 a barrel. Monday saw the index reach a three-month high of $120.99.

In the following weeks, researchers at ANZ Research anticipate that easing travel restrictions in China would increase oil consumption.

Beijing and the business capital Shanghai have returned to normal in recent days after two months of harsh lockdowns to prevent the spread of the Omicron strain. In the majority of Beijing on Monday, traffic restrictions were eased and restaurants opened for dine-in service.

Saudi Arabia, the world's largest oil exporter, increased the official selling price (OSP) for its flagship Arab light crude to Asia by $2.10 from June to a $6.50 premium over Oman/Dubai quotes in July, just below the all-time high recorded in May, when prices reached an all-time high due to fears of disruptions in Russian supplies.

The Organization of Petroleum Exporting Countries and its partners, collectively referred to as OPEC+, voted last week to increase production for July and August by 648,000 barrels per day, or 50 percent more than had been originally anticipated.

All OPEC+ members contributed to the enhanced objective. Nonetheless, several countries, particularly Russia, which faces Western sanctions, have little space to increase production.

"While the new higher monthly objectives continue to be driven by proportionate contributions from all members (including Russia), it is implausible to anticipate an increase close to the headline level," said SPI Asset Management managing partner Stephen Innes in a note.

According to a preliminary Reuters poll released on Monday, crude oil stocks in the United States likely declined last week, but gasoline and distillate stockpiles likely rose.