MELBOURNE Oil prices rose by 2 per cent on Monday after OPEC nations held their output targets as a result of a European Union ban and a price cap on Russian crude.
More Chinese cities loosened COVID 19 curbs over the weekend, despite a patchwork easing in policies that caused confusion across the country on Monday, in a positive sign for fuel demand.
The price of crude futures went up 72 cents, or 0.8 per cent, to $86.29 a barrel at 0430 GMT, while the U.S. West Texas Intermediate WTI crude futures rose 70 cents, or 0.9 per cent, to $80.68 a barrel.
OPEC and allies including Russia agreed on Sunday to stick to their plan to cut output by 2 million barrels per day bpd from November through 2023, according to the Organization of the Petroleum Exporting Countries.
Analysts said the OPEC decision was expected as major producers wait to see the impact of the EU import ban and Group of Seven G 7 $60 a barrel price cap on Russian oil, with Russia threatening to cut supply to any country adhering to the cap.
Baden Moore, head of commodity research at National Australia Bank said that while OPEC remained steady over the weekend, I expect that they will continue to balance the market.
He said the market was already positioned for this outlook, because of the roll-off of the SPR releases and implementation of the EU sanctions and price cap act.
In a note, Wood Mackenzie vice president Ann-Louise Hittle said that 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 in the near term.
The EU oil import ban on Russian crude and the G 7 price cap weighed down the price of crude, despite expectations of slow demand growth. The EU ban and price cap is likely to support prices temporarily, according to Hittle.
China has a zero-COVID policy, but it seems to be easing now after protests by several cities, including Beijing and Shanghai, have relaxed restrictions to varying degrees.