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Oil up after OPEC decision to keep output cuts, start of EU ban on Russian oilATN News

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Anatolia

15:47 | December 5, 2022

Oil prices rose on Monday on supply concerns after OPEC+ producers agreed to maintain their production cut policy in the face of the EU’s ban and price cap on Russian oil exports, while the easing of COVID curbs in China also contributed to price increases .

International benchmark Brent crude was trading at $86.02 a barrel at 09:55 a.m. local time (0655 GMT), up 0.52% from the closing price of $85.57 a barrel in the previous trading session.

At the same time, the US benchmark West Texas Intermediate (WTI) traded at $80.50 a barrel, a gain of 0.65% after the previous session closed at $79.98 a barrel.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, agreed on Sunday to meet the target of cutting oil output by 2 million barrels per day (bpd) by the end of next year.

The video conference meeting took place just one day before the EU ban on Russian seaborne crude oil exports and the controversial $60 per barrel price cap for Russian oil take effect on Monday.

“The decision by OPEC+ to continue with its recently agreed production cut of 2 million bpd until the end of 2023 is not a surprise given the uncertainty in the market over the impact of the December 5 import ban EU-Russia crude oil and the G7 price cap,” Ann-Louise Hittle, vice president of macro oils at Wood Mackenzie, said in an email.

Hitle said the producer group faces downside risks due to weakening global economic growth and China’s zero-Covid policy.

“The adjustment to the EU ban and price cap will probably support prices temporarily,” she added.

The falling value of the US dollar supported higher oil prices by making trade more attractive to oil buyers using other currencies.

The US dollar index, which measures the dollar’s value against a basket of currencies including the Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc, fell 0.29% to 104.19.

Investors are now awaiting Russia’s next response to the sanctions after the Kremlin declared it would not sell oil subject to a Western price cap, even if it meant cutting production.

“We are working on mechanisms to prohibit the use of a price limit instrument, regardless of what level is set, because such interference can further destabilize the market,” Russian Deputy Prime Minister Alexander Novak said on Sunday.

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