The oil price was bullish in the prior week and continued trading at $112 per barrel after the G7 meeting discussed capacity limitation on Russian oil exports.
G7 discussions on Tuesday said China and India have had positive and productive discussions regarding a cap on Russian oil prices.
According to the Wall Street Journal, Russia, one of the world’s largest oil exporters, saw oil revenues surge in spite of moves by the West to stop buying its crude.
As a result, Moscow has shifted its shipments to developing nations like China, India, Turkey, and others, who have purchased large quantities of Russian oil at a discount of more than 20 per cent compared with Western oil prices since the war started in February.
Furthermore, Russian oil is still flowing into Europe, which has decided to ban most purchases of Russian oil but only at the end of the year. By forcing other oil exporters to compete with consistently low Russian prices, an OPEC delegate warned a price cap on Russia could harm other oil exporters.
The situation hasn’t emerged yet because these producers replaced Russian supplies in Europe or because some buyers in Asia prefer to buy non-sanctions barrels at a premium.
Oil also rose as broader sentiment was boosted by China’s move to halve the amount of time new arrivals must spend in isolation, the biggest shift yet in its Covid-19 policy, Bloomberg reported.
Travellers to China must spend seven days in centralised quarantine, then monitor their health for another three days at home, according to a government protocol. That compares with 14 days of hotel quarantine in many parts of China currently, and as many as 21 days of isolation in the past, the business media outlet added.
Investing.com, citing Reuters, reported Hiroyuki Kikukawa, general manager of research at Nissan, as saying: “Investors made position adjustments, but remained bullish on expectations that Saudi Arabia and the UAE would not be able to raise output significantly to meet recovering demand, driven by a pick-up in jet fuels.”
Despite lost Russian supplies and weak output from other OPEC member nations, Saudi Arabia and the UAE have been viewed as the only two members of the organisation with spare capacity. Nevertheless, UAE Energy Minister Suhail al-Mazrouei said on Monday that the emirate is close to meeting its quota of 3,168 million barrels per day (bpd) under the agreement with OPEC and its allies, collectively known as OPEC+, the financial platform added.
For this week’s trading recommendation, oil investors should place a buy order at $110, setting a stop-loss function at $105 and a take-profit at $115.5.