Oil prices increased nearly 2% on expectancies of China's reopening and as OPEC+ defends output-removing targets

December 7, 2022: -On Monday, Oil prices increased over 2% after China signalled a broader relaxation of Covid curbs, OPEC+ announced its decision not to change oil production goals, and a price cap on Russian oil is taking effect.

Both futures increased over 2% in early Asia hours following OPEC+ agreed to maintain its existing policy to reduce oil production by 2 million barrels each day, or nearly 2% of world demand from November until the end of the coming year.

Both futures have pared gains, with Brent crude in the previous trading at $86.12 a barrel and U.S. West Texas Intermediate futures at $80.53 each.

On Monday, the Group of Seven’s rate cap of $60 for Russian seaborne oil and a ban on Russian crude kicked in. Although, economists at the National Bank of Australia experienced it’s “unclear what impact this can have on Russian exports and the way Russia will respond.”

The Kremlin had previously threatened that it would not supply oil to countries setting and endorsing the price cap.

“It is the correct decision to hold steady as if you don’t know the way much, if, at all, Russian production is going to decrease after today,” said Amrita Sen, the research at energy consultancy Energy Aspects head.

Many analysts state that the price hats are “irrelevant” and that oil prices were moving on different factors, like the prospect of China’s reopening.

“There won’t be impact unless Moscow is ahead with its threat and says ‘we’re not going exporting at X amount for any reason, but so far we don’t think that’s happening,” Citi’s global head of commodities investigation, Edward Morse.

Oil prices were buoyed by optimism on China’s that open again, based on reports signalling that the world’s largest importer is easing its Covid curbs.

“The markets’ been moving because of optimism regarding China opening and concerns regarding the U.S. dollar because the Fed might be is decreasing the pace at which it’s raising rates.”

In early Asia hours, Brent crude futures increased nearly 2.37% to $87.60 a barrel, whereas U.S. West Texas Intermediate ahead traded over 2.27% at $81.84 per barrel.

“Brent crude prices which drift higher with greater clarity presented from the meeting, but longer-term, rates that show fairly stuck within the US$80-US$100 range,” IG market strategist Jun Rong Yeap stated.