Oil rose 3% on OPEC+ production plans and Russian crude price caps

  • The G7 and the European Union cap the price of Russian oil at $60 a barrel
  • OPEC + adheres to the target production cut by 2 million barrels per day
  • More Chinese cities are easing COVID-19 restrictions

LONDON (Reuters) – Oil prices rose 3 percent on Monday after OPEC+ countries kept their production targets stable before the European Union embargo and the start of a cap on Russian crude prices for the Group of Seven.

Meanwhile, in a positive sign for fuel demand in the world’s largest oil importer, more Chinese cities eased COVID-19 restrictions over the weekend.

Brent crude futures rose $2.53, or 3%, to $88.10 a barrel by 1330 GMT. West Texas Intermediate crude futures rose $2.40, or 3%, to $82.38.

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.

“The decision … is not a surprise, given the uncertainty in the market about the impact of the December 5 import ban on crude oil from Russia and the G7 price cap,” said Anne-Louise Hittle, vice president at consultancy Wood Mackenzie. .

“In addition, the producer group faces downside risks from the potential for weakening of global economic growth and China’s non-COVID policy.”

The G7 countries and Australia agreed last week to a cap of $60 a barrel for Russian oil carried by sea.

Business and manufacturing activity in China, the world’s second-largest economy, has been hit this year by strict measures to curb the spread of the coronavirus.

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Analysts warn that the continued slowdown in the Chinese economy may reverse gains in oil prices.

“From an OPEC+ perspective, it cannot be easy to make reliable forecasts against this backdrop and the ever-evolving Covid situation in China, which currently looks much more promising from a demand perspective,” said Craig Erlam, senior market analyst at OANDA.

(Reporting by Noah Browning) Additional reporting by Sonali Paul in Melbourne and Emily Chow in Singapore

Our standards: Thomson Reuters Trust Principles.

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