Oil prices rose as much as 2% on Monday after OPEC+ countries maintained their production targets pending a European Union ban and the entry into force of a price cap for Russian crude.
At the same time, in a positive sign for fuel demand, more Chinese cities eased COVID-19 restrictions over the weekend, though a patchy easing of rules sowed confusion across the country on Monday.
Brent crude futures were up 72 cents, or 0.8%, at press time at $86.29 a barrel by 0430 GMT, while US West Texas Intermediate (WTI) crude futures were up. 70 cents, or 0.9%, at $80.68 a barrel.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, jointly called OPEC+, agreed on Sunday to stick with their October plan to cut production by 2 million barrels per day (bpd) from November until 2023.
Analysts said the OPEC+ decision was expected as major producers expect to see the impact of the EU import ban and the Group of Seven (G7) $60 per barrel price cap. on Russian seaborne oil, with Russia threatening to cut off supplies to any country that adheres to the limit.
“Although OPEC held on to production over the weekend, I expect it to continue to balance the market,” said Baden Moore, head of commodity research at National Australia Bank.
“The end of the use of US strategic oil reserves, the application of EU sanctions and the price cap act to tighten the market, although presumably the market has already positioned itself for this prospect,” he said.
The European Union will have to replace Russian crude with oil from the Middle East, West Africa and the United States, which should put oil prices to the bottom, at least in the short term, Wood Mackenzie vice president Ann-Louise said. Hitler, in a note.
“Prices are currently weighed down by expectations of slow demand growth, despite the EU import ban on Russian crude and the G7 price cap. The adjustment to the EU ban and cap of prices will probably support prices temporarily,” Hittle said.
A key factor weighing on demand is China’s “zero COVID” policy, but it now appears to be easing after protests in numerous cities, including Beijing and Shanghai, eased restrictions to varying degrees.
Hittle added that the impending EU embargo on Russian oil products, in addition to crude oil, from February 5, should support demand for crude oil in the first quarter of 2023, as the market is in short supply of diesel and diesel oil. heating.