Oil closes higher with China, OPEC+ and ceiling on Russian exports

Oil futures closed higher on Tuesday (29), in a session in which the commodity was driven by prospects for China.

Protests against the country’s covid-zero policy and some possible easing of restrictions have led to expectations that demand may recover in the world’s second-largest economy.

Meanwhile, possible cuts in the Organization of Petroleum Exporting Countries and allies (OPEC+) and the effects of a ceiling on Russian hydrocarbon prices continued to be closely monitored.

The barrel of WTI oil for January closed up 1.24% (US$0.96), at US$78.20 on the New York Mercantile Exchange (Nymex), while that of Brent for February advanced 0.43% ( $0.36), to $84.25 on the Intercontinental Exchange (ICE).

Commerzbank notes considerable fluctuations in the oil market due to uncertainty surrounding China’s Covid-zero policy and the future course of OPEC+. For Capital Economics, “concrete signs of an effort to get out of covid zero are emerging”, with the announcement today of the effort to vaccinate the elderly. “If all goes well, China could significantly relax covid controls next year,” says the consultancy.

OPEC+ is likely to keep its oil production policy unchanged at Sunday’s meeting, five sources told Reuters, although two other sources said a further production cut would also be considered to bolster prices that have fallen on fears. of economic slowdown.

European Union officials have again failed to agree terms for a price cap on Russian oil sales, with talks over the details of the sanctions program continuing for less than a week for implementation. Negotiations may resume, considering the EU is accelerating the process to release the price cap before 5 December.

Russia, on the other hand, will not supply countries with oil under the terms of the price cap, even if it is more profitable, said Russian Deputy Prime Minister Alexander Novak.

Russia currently supplies oil to several countries at a significant discount, hovering around $20 to the price of Brent oil. The International Energy Agency (IEA) expects Russian oil production to be reduced by around 2 million barrels of oil per day by the end of the first quarter of next year, its boss Fatih Birol told Reuters on the sidelines of a energy conference.

For Commerzbank, the embargo will likely result in a noticeable squeeze in the oil market in early 2023. “We therefore expect the price of Brent to rise again to US$ 95 a barrel in the coming weeks”, assesses the German bank.