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

Oil prices inched higher on Wednesday after European Union leaders agreed to a partial and phased ban on Russian oil and as China ended its COVID-19 lockdown in Shanghai.

Brent crude for August delivery was up 35 cents, or 0.3%, at $115.95 a barrel at 0605 GMT. The contract settled down 1.7% on Tuesday.

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

U.S. West Texas Intermediate (WTI) crude rose 37 cents, or 0.3%, to $115.04 a barrel.

Both benchmarks ended 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 sanctions 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 and two other landlocked Central European states.

In China, Shanghai's strict COVID-19 lockdown ended on Wednesday 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 a production deal of OPEC+, a grouping of Organization of the Petroleum Exporting Countries members and their allies, on expectations such a move would increase supply.

"The full reopening of Shanghai from COVID-19 restrictions may boost sentiment at the periphery, but the possible exemption of Russia by OPEC, from the output agreement, is the bigger story," said Jeffrey Halley, senior market analyst at OANDA.

While there was no formal push for OPEC 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 fuelling 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.

Data from the U.S. government on stockpiles was expected on Thursday. Analysts, in a Reuters poll, expected U.S. crude oil inventories to fall last week, while gasoline and distillate stockpiles were seen up. [EIA/S]