Crude prices soared on Monday as the Organization for the Petroleum Exporting Countries held their target output cut and China eased its Covid measures.
In the latest trading session, Brent futures for February delivery rose by 1.05% to $86.47 a barrel.
Likewise, the West Texas Intermediate crude contract for January soared by 1.11% to $80.87 per barrel. This jump came as OPEC continued to reduce output by 2.00 million barrels a day as of November until 2023.
Another key factor that affected crude was the hopes of China’s full reopening after the country relaxed its Covid policies.
Over the past week, several cities eased their measures. Among these are the economic hubs like Beijing and Shanghai.
Furthermore, some speculations suggest that the government will officially announce a reopening in the coming weeks.
Once this happens, the decision would impact the market due to the country’s status as the world’s largest crude importer.
The main driving force for this move was the wave of protests pushing against the strict lockdown measures.
However, there is a low chance of a total reopening given the high infection increase rate.
In light of this, analysts warned of possible near-term market volatility if the policy curbs caused a jump in Covid cases.
G7 Russian Crude Price Cap Begins
On December 05, the Group of Seven Nation’s price cap on Russian crude took effect.
G7’s move was designed to hinder Moscow’s ability to finance its war against Ukraine.
Under the regulation, transportation of the product bought above the price cap would not be allowed.
Consequently, it would be difficult for Russia to sell it at a higher amount as the group controls major shipments and insurance firms.
Before this, several major players, including the EU, the United States, Britain, Canada, and Japan, placed a ban on Russian crude.
Meanwhile, Moscow on Monday stated that they would not accept the limitation, even at the cost of a production cut.
For now, the ceiling is set to $60.00 per barrel, which will be reviewed by the G7 and EU every two months.
