Oil prices rose 2% on Monday after OPEC+ countries kept their production targets stable in the run-up to a European Union ban and price cap on Russian crude.
At the same time, as a positive sign for fuel demand, more Chinese cities eased COVID-19 restrictions over the weekend.
Brent crude oil futures rose $1.84, or 2.2%, to $87.41 a barrel at 0142 GMT, while US West Texas Intermediate (WTI) crude futures gained $1.64, or 2%, to $81.62 per barrel.
The Organization of Petroleum Exporting Countries (OPEC) and allies including Russia, collectively dubbed OPEC+, agreed on Sunday to stick to their October plan to cut production by 2 million barrels per day (bpd) from November to 2023.
Analysts said the OPEC+ decision was expected as major producers await the impact of the EU import ban and the Group of Seven (G7) $60-a-barrel price cap on Russian oil by sea, with Russia threatening to cut supplies to every country that adheres to this reduction. the cap.
“The decision reflects the unpredictability of supply and demand over the coming months,” analysts at ANZ Research said in a client note.
The European Union will have to replace Russian crude with oil from the Middle East, West Africa and the United States, which should put a floor under oil prices at least in the short term, said Wood Mackenzie Vice President Ann-Louise Hittle in a note. .
“Prices are currently depressed by expectations of slow demand growth, despite the EU import ban on Russian crude and the G7 price cap. The adjustment of the EU ban and price cap is likely to temporarily support prices,” Hittle said.
A key factor that has weighed on the question is China’s zero-COVID policy, but that now appears to be easing after protests followed by several cities, including Beijing and Shanghai, easing restrictions to varying degrees.
Hittle added that the looming EU embargo on Russian oil products, in addition to crude oil, from February 5 should support crude oil demand in the first quarter of 2023 as the market is short on diesel and fuel oil.
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