WTI crude oil closed 3.8% lower on Monday as it settled at $76.93 as OPEC+ have locked in their production levels, and G7 nations have imposed a price cap on Russian oil.
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On Sunday, the Organization of the Petroleum Exporting Countries and a group of producers led by Russia (OPEC+) decided to lock in their production levels at 2 million barrels of oil per day – the same production level that had been decided back in October after a production cut.
Meanwhile, the G7 nations and Australia decided to impose a price cap of $60 per barrel starting from Monday on Russian oil imports, capping it at least 5% below the market rate and allowing for revisions every two months.
Russian Deputy Prime Minister Alexander Novak called this price cap an interference that violated the rules of free trade.
Novak commented, “We will sell oil and petroleum products only to those countries that will work with us under market conditions, even if we have to reduce production a little.”
Moreover, there are signs that China, the biggest oil importer, could ease up on COVID curbs which could boost the demand for oil. Later this week, Chinese President Xi Jinping is expected to travel to Saudi Arabia, where energy markets could definitely be on the agenda.
The Energy Select Sector SPDR ETF (XLE) has declined 2.84% over the past week and closed at $87.59. Natural gas fell 11.2% to $5.577 and could be volatile as winter sets in.
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