VIENNA: Oil futures jumped Monday amid good news on the demand and supply side, and reports that OPEC will be sticking to its production cut target and China is softening its Covid-zero stance, which has sparked hopes of an outsized demand.
Also read: Oil up as US crude stocks seen falling, OPEC+ concerns limit gains
The OPEC+, or the Organization of the Petroleum Exporting Countries and its allies — including Russia — said on Sunday it would stick to the oil production target the group set in October: to slash output by 2 million barrels per day from November through to end-2023. The production cut is equivalent to about 2% of the world’s demand, and is the largest reduction since the outbreak of COVID-19.
Also read: Oil rises after Saudis deny report of OPEC supply increase
The oil cartel had slashed Nigeria’s oil production output by 84,000 bpd as part of the cuts before the latest decision, although the country has been unable to meet its quota which peaked at about 1.83 million bpd for over a year.
Back in October, OPEC+ had said that the decision was made “in light of the uncertainty that surrounds the global economic and oil market outlooks.” The move angered the US, and the White House accused the OPEC+ of “aligning with Russia.” That’s because tighter oil supply typically drives up prices, which may help prop up Russia’s war chest, despite sanctions and boycotts over its invasion of Ukraine. On Sunday, the OPEC said the move was “purely driven by market considerations.”
Also read: OPEC set to stick or slash more amid plan to cap Russian oil price
US West Texas Intermediate oil futures were up 1.1% at 80.84 a barrel at 10.46 p.m. EST on Sunday, while international Brent crude oil futures were also 1.1% higher at $86.47 a barrel — that’s after jumping as much as 2.4% earlier in the day. Hopes of China’s economic reopening from the pandemic are also boosting market sentiment.
The expectation that the world’s second-largest economy is finally eyeing an exit from Covid came after the country’s top Covid official appeared to tone down the country’s hardline Covid-zero approach last week. Several Chinese cities — including financial hub Shanghai and tech hub Hangzhou — relaxed strict Covid testing rules over the weekend.
Prices could jump to $120 a barrel next year if Russia cannot find enough “dark ships” — vessels that turn off tracking devices — to export crude covertly, analysts at Bernstein estimate. The price limit on Russian crude takes effect on Monday.
However, Kremlin spokesman Dmitry Peskov said Moscow will not accept the price cap and has made “certain preparations” to counter the move, TASS state news agency reported on Friday.
