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Oil prices rise after OPEC+ keeps production cut targets, China eases COVID mitigation

  • Brent rose 0.8% by 0430 GMT, WTI up 0.9%
  • OPEC+ sticks to plans to cut production by 2 million bpd
  • Several Chinese cities are easing their COVID-19 restrictions

MELBOURNE, Dec 5 (Reuters) – Oil prices rose as much as 2% on Monday after OPEC+ countries kept their production targets steady in the face of an EU ban and a price cap on Russian crude.

Meanwhile, in a positive sign for fuel demand, several Chinese cities eased their Covid-19 curbs over the weekend, although a patchwork of politics saw confusion across the country on Monday.

Brent crude futures were last up 72 cents, or 0.8%, at $86.29 a barrel by 0430 GMT, while US West Texas Intermediate (WTI) crude futures were up 70 cents, or 0.9%, at $80.68 per barrel.

The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, collectively known as OPEC+, agreed on Sunday to stick to their October plan to cut production 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 seaborne Russian oil, with Russia threatening to cut supplies to any country that keeps to the hood.

“While OPEC held 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) Rollout of the SPR releases and implementation of EU sanctions and price cap law to tighten the market, although we expect the market has already positioned itself for this prospect,” he said, referring to the US strategy. petroleum reserve.

The European Union will have 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 short term, Wood Mackenzie vice president Ann-Louise Hittle said in a note. .

“Prices are currently weighed down by expectations of slow demand growth, despite the EU oil import ban on Russian crude and the G7 price cap. The 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-Covid policy, but that appears to be easing now after protests followed by several cities, including Beijing and Shanghai, easing restrictions to varying degrees.

Hittle added that the EU’s looming embargo on Russian oil products, in addition to crude oil, from February 5 should support demand for crude oil in the first quarter of 2023, as the market lacks diesel and fuel oil.

Reporting by Sonali Paul in Melbourne and Emily Chow in Singapore; Editing by Cynthia Osterman and Kenneth Maxwell

Our standards: Thomson Reuters Trust Principles.

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