Oil Prices Rose by 2%

On Monday, oil prices rose as much as 2% after China signaled a broader relaxation of COVID curbs, OPEC+ announced it would not change its oil production targets, and a price cap on Russian oil went into effect.

After OPEC+ decided to continue its current policy of reducing oil production by 2 million barrels per day, or roughly 2% of global demand, from November through the end of next year, both futures prices increased by more than 2% in early Asia.

Both futures have since pared their gains, with Brent crude last trading at $86.12 per barrel and West Texas Intermediate futures at $80.53 per barrel in the United States.

Russia’s seaborne oil price cap of $60 per barrel and a ban on Russian crude entered into force.

The Kremlin has previously threatened not to supply oil to countries that set and support the price cap. Another analyst believes the price caps are “irrelevant” and that other factors, such as the prospect of China reopening, influence oil prices. Oil prices also received a boost from optimism about China’s reopening, based on reports that the world’s largest importer is relaxing COVID restrictions. Brent crude futures rose as much as 2.3712% to $87.601 per barrel in early Asia hours, while US West Texas Intermediate futures rose more than 2.27% to $81.84 per barrel.

Russia-China Natural Gas Pipeline

This weekend, a large tunnel on the Yangtze River was completed, marking a major construction milestone for a new Russia-China natural gas pipeline.

According to local media, the river tunnel is more than 10 km long and took 28 months to build, according to PipeChina.

Still, it will take years to complete and commission the massive gas pipeline from Russia to China. This is currently scheduled to happen in 2025.

Because of this, China will have to wait a while before it can significantly increase its imports of Russian gas through pipelines. Russia is sending natural gas to China via the Power of Siberia pipeline.

The two countries have developed close cooperation and energy ties in recent years. China had taken over as Russia’s primary market for energy exports after Europe stopped importing Russian coal, imposed an EU embargo on crude oil imports by sea, and only received a small portion of the Russian gas volumes imported before Russia invaded Ukraine.

Since Russia invaded Ukraine, China has imported $60 billion in energy from Russia, including coal, oil, and natural gas.

Greece and Bulgaria Discuss Oil Pipeline

A European Union embargo on Russian oil that goes into effect on Monday has prompted Greece and Bulgaria to discuss reviving a long-dormant oil pipeline project that would bypass the Bosphorus Strait.

The pipeline would run 280 kilometers (174 miles) from Alexandroupolis on the Aegean Sea to Burgas on the Black Sea, extending as far north as Constanza in Romania. Burgas and Constanza refineries can still purchase oil from Kazakhstan and Azerbaijan.

However, Bulgaria withdrew from the project in 2010, citing environmental concerns. According to industry insiders, the project was scuttled due to US opposition to reliance on Russian oil.

The north-flowing pipeline, however, would not benefit Russia, and the idea has gained new urgency in light of Western sanctions on Russian oil, which the International Energy Agency believes will be permanent.