By Peter Nurse
Investing.com -- Oil prices climbed strongly Monday after a group of top producers maintained their production targets while a European Union ban on Russian crude imports and an associated G7 price cap came into force.
By 09:05 ET (14:05 GMT), U.S. crude futures traded 2.8% higher at $82.22 a barrel, while the Brent contract rose 2.7% to $87.86.
The Organization of Petroleum Exporting Countries and allies, known as OPEC+, decided on Sunday to continue its policy announced last month of reducing oil production by 2 million barrels per day through 2023, in order to support prices.
“OPEC+ will next meet in June, although given the amount of uncertainty, one cannot rule out the potential need of calling for a meeting in the interim,” analysts at ING said, in a note.
A lot of this uncertainty stems from the ongoing COVID outbreak in China, the largest importer of crude in the world, and the response by the country’s authorities to these infections.
Both crude benchmarks posted their first weekly gains last week on optimism that the country is moving towards a widespread relaxation of its extremely tight mobility restrictions, with several cities lifting their curbs.
Economic activity in China, the world's second largest economy, has been hit this year amid the strict measures to curb the spread of the coronavirus.
Away from China, the Group of Seven largest industrialized countries finally agreed last week on a $60-a-barrel price cap on seaborne Russian oil. This has come into effect at the same time as a ban by the European Union on the importation of Russian oil.
“The cap is still above what Russia will be receiving for its Urals, which calls into question how effective the cap will be at the moment,” ING added.
The price cap was designed to try and limit Moscow's ability to finance its war in Ukraine, but Russia has said the move would not have its desired impact and instead would destabilize global energy markets.
The move will allow other countries to continue importing seaborne Russian oil but it will prohibit shipping, insurance and reinsurance companies from handling cargoes of Russian crude unless it is sold for less than $60 a barrel.