Oil is growing due to sanctions against Russia
2022.12.05 09:46
Oil is growing due to sanctions against Russia
Budrigannews.com – Monday saw a sharp rise in oil prices as a group of major producers maintained their production targets and the G7 price cap and EU ban on Russian crude imports came into effect.
Futures were trading at $82.22 a barrel at 09:05 ET (14:05 GMT), while the contract was up 2.7% to $87.86.
On Sunday, the Organization of Petroleum Exporting Countries and their allies, or OPEC+, decided to keep the policy of reducing oil production by one day per day through 2023, which was announced last month, in order to support prices.
Analysts at ING wrote in a note that “OPEC+ will next meet in June, although given the amount of uncertainty, one cannot rule out the potential need to call for a meeting in the interim.”
The ongoing COVID outbreak in China, the world’s largest crude importer, and the country’s response to these infections account for a significant portion of this uncertainty.
The optimism that the country is moving toward a widespread relaxation of its extremely restrictive mobility restrictions, with several cities lifting their curbs, led to the first weekly gains for both crude benchmarks last week.
This year, China’s economy, the second largest in the world, has been hit hard by strict measures to stop the coronavirus from spreading.
A $60-per-barrel price cap on seaborne Russian oil was finally agreed upon last week by the Group of Seven’s largest industrialized nations away from China. The European Union has placed a ban on the importation of Russian oil at the same time that this has taken effect.
ING continued, “The cap is still above what Russia will receive for its Urals, which calls into question the cap’s effectiveness at the moment.”
The price cap was put in place with the intention of making it more difficult for Moscow to finance its war in Ukraine. However, Russia claims that the move will destabilize global energy markets rather than have the intended effect.
Other nations will be able to continue importing Russian oil via sea, but shipping, insurance, and reinsurance companies will not be able to handle Russian crude cargoes unless it is sold for less than $60 per barrel.
