MELBOURNE (Reuters) – Oil prices rose as much as 2 percent on Monday after OPEC+ countries kept their production targets unchanged before the European Union embargo and a cap on Russian crude prices.
Meanwhile, in a positive sign for fuel demand, more Chinese cities eased COVID-19 restrictions over the weekend, though patchwork easing in policies created confusion across the country on Monday.
Brent crude futures rose 72 cents, or 0.8%, to $86.29 a barrel at 0430 GMT, while US West Texas Intermediate crude futures rose 70 cents, or 0.9%, to $80.68 a barrel.
The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, called the OPEC+ community, agreed on Sunday to stick to October’s plan to cut production by two million barrels per day from November until 2023.
Analysts said the OPEC+ decision was expected as major producers wait to see the impact of the EU’s import embargo and G7 ceiling of $60 a barrel on Russian seaborne oil, with Russia threatening to cut off supplies to any country that complies. the hat.
“While OPEC remained flat on production over the weekend, I would expect it will continue to balance the market,” said Baden Moore, head of commodity research at the National Australia Bank.
He said, “(a) launching Strategic Petroleum Reserve issues, implementing EU sanctions and the price cap law to tighten the market, although we expect that the market has already set these expectations,” referring to the US strategy. Petroleum reserves.
The EU will need to replace Russian crude with oil from the Middle East, West Africa and the United States, which should put a floor on oil prices at least in the near term, Anne-Louise Hettle, vice president of Wood Mackenzie, said in a note. .
“Prices are currently affected by expectations of slower demand growth, despite the European Union’s ban on importing Russian crude oil and the G7 cap. The adjustment of the European embargo and price cap is likely to support prices temporarily,” Hettle said.
A major factor affecting demand has been China’s coronavirus-free policy, but that now appears to be easing after post-protest protests by several cities, including Beijing and Shanghai, eased restrictions to varying degrees.
Hettle added that the looming EU ban on Russian oil products, in addition to crude oil, from February 5, would support demand for crude oil in the first quarter of 2023, as the market lacks diesel and heating oil.
(Reporting by Sonali Paul in Melbourne and Emily Chow in Singapore; Editing by Cynthia Osterman and Kenneth Maxwell
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