(Bloomberg) — Oil rose after OPEC+ kept oil production steady, sanctions on Russian crude took effect and China made more progress on reopening.
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West Texas Intermediate rose above $80 a barrel after rising nearly 5% last week as Beijing eased strict virus restrictions that have hampered energy consumption. The Organization of the Petroleum Exporting Countries and its allies including Russia agreed to keep output at current levels on Sunday, pausing to capture global markets in a flux of flux.
To further punish Moscow for its invasion of Ukraine, the European Union, along with the G7, agreed to impose a $60-a-barrel cap on Russian crude, while banning most imports. Import by sea from Monday. The initiative aims to punish Russia financially, while keeping the country’s oil flowing to other countries. Russian Deputy Prime Minister Alexander Novak again rejected the ceiling, saying the country is ready to cut output if necessary.
The rise in oil prices is the latest twist in an extremely volatile year for the world’s most important commodity, with markets rattled by Europe’s biggest land conflict since World War II and a a series of strong central bank tightening to combat inflation. After hitting their lowest level since December early last week, US benchmark prices have rebounded.
“It remains uncertain whether this plan will ensure the smooth flow of barrels of oil from Russia to the Asian market or whether there will be disruptions,” said RBC Capital Markets analysts including Helima Croft. significantly due to intentional supply actions from Moscow or concerns about the risks of international compliance departments”. in a note.
In recent weeks, oil traders have taken notice of China’s rapidly changing approach to handling Covid-19. After a rare series of protests, authorities are easing restrictions, supporting the outlook for energy demand as well as other commodities. Major cities including Shanghai, Shenzhen and Guangzhou have eased restrictions in recent days, accelerating the transition to reopening.
The OPEC+ deal came after an online meeting, replacing the original face-to-face meeting at the group’s headquarters in Vienna. According to delegates, the ministerial-level Joint Oversight Committee, which oversees the implementation of production cuts, will meet again on February 1. Most analysts had expected no change in supply policy by the end of the week.
The deal for a price ceiling on Russian crude has been in the works for months as the US expressed concern that an EU ban on Russian oil and related financial and insurance services would lead to higher prices. mutation. However, the currently agreed level is about $10 higher than the main Russian Urals grade, suggesting its impact on those flows may be limited. In Asia, however, the ceiling is lower than the price of ESPO crude, which is shipped from Russia’s far east.
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