War in Ukraine: Oil prices rise as Russian crude limit approaches

Oil prices have risen after major producers agreed to continue production and the G7 and its allies agreed to cover the price of Russian oil.

Brent crude rose about 0.6% above $86 a barrel on Monday morning.

On Friday, the G7 agreed to limit the price of Russian oil to $60 per barrel to increase pressure on Russia over the invasion of Ukraine.

Meanwhile, the OPEC+ group of oil producers said over the weekend that it would maintain its production cut policy.

Ukraine’s Zelensky says Russian oil cap ‘weak’
G7 and allies approve cap on Russian oil price

OPEC+ is a group of 23 oil-exporting countries, including Russia, that meet regularly to decide how much crude oil to sell on the world market.

“This OPEC+ decision to keep the quota where it is … is itself a kind of implicit support for the oil market,” Kang Wu of S&P Global Commodity Insights told the BBC.

Analysts said oil prices were also boosted by the easing of Covid restrictions in some Chinese cities, which could lead to a surge in demand for oil.

More cities in China, including Urumqi in the northwest, have said they will loosen restrictions after mass protests against the country’s zero-covid policy.

price limit
In a joint statement last week, the G7 and Australia said the $60 target on Russian oil would take effect “very soon after” on Monday.

They said the move was intended to “prevent Russia from profiting from its aggressive war against Ukraine.”

The price cap means that only Russian oil bought for less than $60 per barrel will be allowed to ship with G7 and EU tankers, insurance companies and credit institutions.

This could make it difficult for Moscow to sell its oil at a higher price, as many of the major shipping and insurance companies are based in the G7.

Russia has said it will not accept the price cap and has threatened to stop exporting oil to countries that adopt the measures.

Jorge León, senior vice president at Norwegian energy consultancy Rystad Energy, told the BBC’s Today program that oil prices could rise as a result.

“Russia has been very clear that it will not sell crude (oil) to anyone who subscribes to the price cap,” he said.

“So what’s likely to happen is that we’re going to see some disruption over the next couple of months, and therefore oil prices will probably start to rise again in the next couple of weeks.”

The G7 is an organization of the world’s seven largest so-called “advanced” economies, which dominate world trade and the international financial system. They are Canada, France, Germany, Italy, Japan, the United Kingdom and the United States.