Crude rises as OPEC+ keeps target, China COVID curbs ease, Russia oil ban enforced

James Dennis

05-Dec-2022

SINGAPORE (ICIS)–Crude prices rose on Monday on news that OPEC and its allies (OPEC+) had agreed to maintain their present output target and that China has further eased its strict zero-COVID measures.

Meanwhile, the EU/G7 Russia crude ban and price cap also came into effect.

Crude prices as of 07:42 GMT (in $/bbl)

Crude Contract Low High Open Last Change
Brent Feb 85.50 87.60 85.73 86.12 0.55
WTI Jan 79.86 81.84 79.99 80.49 0.51

Shanghai, China’s commercial hub, along with major cities such as Shenzhen, Guangzhou and Urumqi have announced an easing of its COVID restrictions following protests in recent days.

Meanwhile, the EU ban on seaborne Russian crude exports came into effect on 5 December. This follows news on 2 December that the EU and G7 had finally agreed a $60/bbl price cap on Russian oil exports which will also apply from Monday.

Russia has repeatedly said that it would not sell crude to countries that impose the price cap. Russian Deputy Prime Minister Alexander Novak has also said that the country is willing to cut production in response to the G7 move.

Prior to the news from China and G7 price cap agreement, there had been a degree of uncertainty in the market ahead of the 4 December OPEC+ meeting.

There were some expectations that the producers group could make further output cuts amid worries over demand from China the world’s leading crude oil importer.

This followed the rise in COVID-19 cases in China to record levels, the re-introduction of stricter COVID controls and resultant street protests.

Inflationary pressure and global recession fears have been weighing on oil demand in recent months raising concerns among OPEC+ members.

However, the group members, particularly leading crude exporter Saudi Arabia, have faced increased pressure from the US and other consuming nations concerned over the impact of high oil prices on their economies amid the continued war in Ukraine and sanctions on Russia.

Prior to the rise in infections and recent civil disturbances, China’s crude imports had been forecast to increase in the coming months.

Imports had been expected to be boosted by recent release of crude import quotas, new refining capacity demand, seasonal factors as well as a hoped-for easing of COVID-19 rules.

Following a video conference on 4 December, OPEC+ members re-affirmed their commitment to present output target of 41.856m bbl/day.

The target production level came into effect on 1 November and is presently set to extend until December 2023. It marked a 2m bbl/day cut on the previous August OPEC+ production target, but due to the group’s under production the actual cut is likely closer to 1m bbl/day.

OPEC+ is scheduled to have its next full meeting on 4 June 2023. However, OPEC+ Joint Ministerial Monitoring Committee (JMMC) will meet in February next year.

Focus article by James Dennis

Click here to read the Ukraine topic page, which examines the impact of the conflict on oil, gas, fertilizer and chemical markets.

Visit the ICIS Coronavirus topic page for analysis of the impact on chemical markets and links to latest news.

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