Oil rises after OPEC+ keeps output steady

LONDON, Dec 5 (Reuters): Oil prices rose on Monday after OPEC+ nations held their output targets steady ahead of a European Union ban and a G7 price cap which kicked in on Russian crude.
At the same time, in a positive sign for fuel demand in the world's top oil importer, more Chinese cities eased Covid-19 curbs over the weekend.
Brent crude futures were last up $2.29, or 2.7 per cent, to $87.86 a barrel at 1200 GMT, while WTI crude futures gained $2.24, or 2.8 per cent, to $82.22 a barrel.
The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, together called OPEC+, agreed on Sunday to stick to their October plan to cut output by 2.0 million barrels per day (bpd) from November through 2023.
"The decision ... is not a surprise, given the uncertainty in the market over the impact of the Dec 5 EU Russia crude oil import ban and the G7 price cap," said Ann-Louise Hittle, vice president of consultancy Wood Mackenzie.
"In addition, the producers' group faces downside risk from the potential for weakening global economic growth and China's zero Covid policy."
The price cap on Russian oil agreed by the EU, G7 and Australia came into force on Monday. It aims to restrict Russia's revenue as punishment for its invasion of Ukraine, while making sure Moscow keeps supplying the global market.
Kremlin spokesman Dmitry Peskov said on Monday the measure would contribute to a destabilisation of world energy markets and would not affect Russia's military campaign in Ukraine.
The cap took effect alongside an EU embargo on maritime deliveries of Russian crude oil, which comes several months after an embargo imposed by the United States and Canada.
Russia is the world's second-largest crude exporter and without the cap it would be easy to find new buyers at market prices.
The measure means only oil sold at a price equal to or less than $60 per barrel can continue to be delivered.
Companies based in the EU, G7 countries and Australia will be banned from providing services enabling maritime transport, such as insurance, with oil above that price.
The G7 nations -- Canada, France, Germany, Italy, Japan, Britain and the United States -- provide insurance services for 90 percent of the world's cargo and the EU is a major player in sea freight.
This means they should be able to pass on the cap to the majority of Russia's customers around the world, making for a credible price cap.
There is a transition period, and the cap will not apply to cargoes loaded before December 5, and a further cap on oil products will come into effect on February 5.
The West has adopted the cap of $60, well above the current cost of producing oil in Russia, so Moscow will have an incentive to continue pumping crude. Russia will continue to earn revenue, even if it is reduced.