Brent holds firm as OPEC+ maintains output cut targets, G7 price cap takes effect

Front-month ICE Brent has held steady and only inched up by $0.05/bbl on the day from Friday, to $86.55/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

OPEC and its allies, which include Russia, have agreed to maintain their current policy of reducing oil production by 2 million b/d until the end of next year, but to take "immediate additional measures" if needed.

According to Gary Peach, an oil market analyst at Energy Intelligence, "OPEC's production targets make sense" because the group believes that the market is "adequately priced and adequately supplied."

OPEC+ members are already underproducing compared to their targets, and analysts are expecting Russian oil output to fall by 0.5-1 million b/d early in 2023 - after EU sanctions on both crude and oil products have come into effect.

“If Russia ends up taking off more oil than about a million b/d, then the world becomes short on oil, and there would need to be an offset somewhere, whether that's from OPEC or not," said Jacques Rousseau, managing director at Clearview Energy Partners.

Major Chinese cities have eased Covid-19 restrictions following a massive backlash from the public. Shanghai is the latest city to ease curbs, following similar moves in Beijing, Shenzhen, Chengdu and Tianjin.

Downward pressure:

G7 nations have agreed to a price cap of $60/bbl on Russian seaborne oil, which Russia has voiced strong opposition to.

Despite China easing Covid-19 restrictions, analysts still remain cautious about China’s weak economic data on the back of recent Covid-related lockdowns and zero-Covid policy.

Leon Li, a Shanghai-based analyst at CMC Markets, has told Reuters that "the current economic data of China is still weak, with a sharp decline in imports and exports, which reflects the sluggish domestic demand and the declining trend of the overseas economy. It is challenging to drive the demand for crude oil.”

By Konica Bhatt

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