Melbourne, Dec. 5 (BNA): Oil prices rose as much as 2% on Monday after OPEC+ nations kept their production targets flat ahead of 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, Reuters reports.
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 with major producers waiting to see the impact of the EU ban on imports and the G7 ceiling of $60 a barrel on Russian seaborne oil, with Russia threatening to cut supplies to any country abiding by the pact. 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.
The main factor affecting demand is China’s policy of not spreading the new Corona virus, but this appears to be easing now, easing 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.