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Oil prices rose as much as 2% on hopes of China’s reopening and as OPEC+ maintains output targets

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A pump jack on an oil field owned by Bashneft company near the village of Nikolo-Berezovka, northwest from Ufa, Bashkortostan, Russia, in 2015. The Group of Seven’s price cap of $60 for Russian seaborne oil and a ban on Russian crude kicked in on Monday.
Sergei Karpukhin | Reuters

Oil prices climbed as much as 2% on Monday after China signaled a broader relaxation of Covid curbs, OPEC+ announced its decision not to change oil production targets, and a price cap on Russian oil took effect.

Both futures rose more than 2% in early Asia hours after OPEC+ agreed to maintain its current policy of reducing oil production by 2 million barrels per day, or around 2% of world demand from November until the end of next year.

Both futures have since pared gains, with Brent crude last trading at $86.12 a barrel, and U.S. West Texas Intermediate futures at $80.53 per barrel.

The Group of Seven’s price cap of $60 for Russian seaborne oil and a ban on Russian crude kicked in on Monday. However, economists at National Bank of Australia say it’s “unclear what impact this will have on Russian exports and how Russia will respond.”

The Kremlin had previously threatened that it will not supply oil to countries setting and endorsing the price cap.

“It is the right decision [for OPEC] to hold steady, especially if you don’t know how much, if at all, Russian production is going to fall after today,” said Amrita Sen, head of research at energy consultancy Energy Aspects.

Another analyst is of the view that the price caps are “irrelevant” and that oil prices were mainly moving on other factors, such as the prospect of China’s reopening.

“There won’t be any impact unless Moscow goes ahead with its threat and says ‘we’re not going to export at X amount or whatever reason but so far we don’t think that’s going to happen,” Citi’s global head of commodities research, Edward Morse, told CNBC.

Oil prices were also buoyed by optimism on China’s reopening, based on reports signaling that the world’s largest importer is easing its Covid curbs.

“The markets’ been moving because of optimism about China opening, and concerns about the U.S. dollar because the Fed might be reducing the pace at which it’s raising rates.”

In early Asia hours, Brent crude futures rose as much as 2.37% to $87.60 a barrel, while U.S. West Texas Intermediate futures traded up over 2.27% at $81.84 a barrel.

“Brent crude prices were drifting higher this morning with greater clarity presented from the meeting but longer-term, prices seem fairly stuck within the US$80-US$100 range,” said IG market strategist Jun Rong Yeap.

— CNBC’s Jihye Lee contributed to this report

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