- Brent was up 0.8% at 0430 GMT, WTI up 0.9%
- OPEC+ is sticking to plans to cut production by 2 million barrels per day
- More Chinese cities ease COVID-19 restrictions
MELBOURNE, Dec 5 (Reuters) – Oil prices rose as much as 2 percent on Monday after OPEC+ members kept their output targets steady ahead of a European Union ban and the imposition of a price cap on Russian crude.
Brent crude futures were last up 72 cents, or 0.8 percent, at $86.29 a barrel at 0430 GMT, while U.S. West Texas Intermediate (WTI) crude futures were up 70 cents, or 0.9 %, to 80.68 dollars per barrel.
The Organization of the Petroleum Exporting Countries (OPEC) and allies, including Russia, collectively called OPEC+, agree on Sunday to stick to its October plan to cut output by 2 million barrels per day (bpd) from November to 2023.
Analysts said the OPEC+ decision was expected as major producers wait to see the impact of the EU’s import ban and the Group of Seven’s (G7) $60-a-barrel price cap on offshore Russian oil, with Russia threatening to reduce supplies to any country that adheres to the cap.
“Although OPEC remained steady on output over the weekend, I expect they will continue to balance the market,” said Baden Moore, head of commodities research at National Australia Bank.
“(A) Reduction in SPR releases and the implementation of EU sanctions and the price cap act to tighten the market, although we would expect that the market is already positioned for that prospect,” he said, referring to US strategic strategy oil reserve.
The European Union will need 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 for the near term, Wood Mackenzie Vice President Anne-Louise Hittle said in a note.
“Prices are currently weighed down by expectations of sluggish demand growth, despite the EU ban on Russian crude imports and the G7 price cap. An adjustment to the EU ban and price cap is likely to support prices temporarily,” Hittle said.
A key factor weighing on demand is China’s zero-spread policy for COVID, but it now appears to be waning after protests followed in several cities, including Beijing and Shanghai, relaxing restrictions To varying degrees.
Hittle added that the looming EU embargo on Russian petroleum products, in addition to crude oil, from February 5 should support crude oil demand in the first quarter of 2023 as the market lacks diesel fuel and fuel oil.
Reporting by Sonali Paul in Melbourne and Emily Chow in Singapore; Editing by Cynthia Osterman and Kenneth Maxwell
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