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NEW YORK (Reuters) – Oil prices rose on Monday on optimism that China would see a significant recovery in demand after positive signs that the coronavirus pandemic was receding in the hardest hit areas.

Brent crude rose $1.34, or 1.2%, to $112.89 a barrel as of 12:10 p.m. EDT (5:10 p.m. EDT) 1:42 p.m. GMT, while U.S. West Texas Intermediate crude rose down $2.22, or less than 0.1%, to $112.71 a barrel.

Shanghai aims to reopen broadly and allow normal life for the city’s 25 million residents to resume from June 1, a city official said on Monday, after saying 15 of its 16 districts had eliminated the cases outside quarantine areas.

However, an estimated 46 cities in China are in lockdown, affecting procurement, factory production and energy consumption.

“We see a lot of signals that demand will start to return to this region, supporting higher prices,” said Bob Yawger, director of energy futures at Mizuho.

In line with the unexpected drop in industrial production, China processed 11% less crude oil in April, with the lowest daily throughput since March 2020.

U.S. gasoline futures hit a record high again on Monday as falling inventories stoked supply concerns.

“Oil prices will remain bullish, especially the WTI short-term contract, as U.S. gasoline prices continued to rise amid falling petroleum product imports from Europe. “, said Kazuhiko Saito, chief analyst at Fujitomi Securities.

Oil prices also found some support as diplomats and EU officials expressed optimism that an agreement could be reached on a gradual embargo on Russian oil despite concerns over supplies in Europe. from the east.

Austria expects the EU to agree to the sanctions in the coming days, Foreign Minister Alexander Schallenberg said on Monday.

German Foreign Minister Annalena Baerbock said the bloc would need a few more days to reach an agreement.

“With the EU’s planned ban on Russian oil and OPEC’s slow production ramp-up, oil prices are expected to remain close to current levels, close to $110 a barrel,” said Naohiro Niimura, partner at Market Risk Advisory.

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