Oil prices rise as OPEC+ maintains output targets and China relaxes Covid curbs.

Oil prices rose on Monday after OPEC+ nations maintained their output targets ahead of a European Union ban and a price cap on Russian crude.

At the same time, in a positive sign for fuel demand, more Chinese cities relaxed Covid-19 curbs over the weekend, though the partial relaxation of policies caused confusion across the country on Monday.

While prices rose as much as 2% earlier in the day, both the Brent and US West Texas Intermediate (WTI) contracts have since pared some of their gains. Brent crude futures were up 49 cents, or 0.6 percent, to $86.06 a barrel at 0700 GMT, while WTI crude futures were up 51 cents, or 0.6 percent, to $80.49 a barrel.

On Sunday, the Organization of Petroleum Exporting Countries (OPEC) and its allies, including Russia, agreed to stick to their October plan to cut output by 2 million barrels per day (bpd) from November to 2023.

Analysts predicted the OPEC+ decision as major producers assess the impact of the EU import ban and the Group of Seven (G7) $60-per-barrel price cap on seaborne Russian oil, with Russia threatening to cut supply to any country that adhered to the cap.

“While OPEC kept output steady over the weekend, I expect them to keep balancing the market,” said Baden Moore, head of commodity research at National Australia Bank.

“The roll-off of the SPR releases, as well as the implementation of the EU sanctions and price cap, act to tighten the market,” he said, referring to the US strategic petroleum reserve.

However, the OPEC+ decision to maintain output, combined with weak Chinese economic data, could reverse oil’s price gains, according to Leon Li, a Shanghai-based analyst at CMC Markets.

“China’s current economic data remains weak, with a sharp decline in imports and exports reflecting sluggish domestic demand and a declining trend in the overseas economy.” “It is difficult to drive crude oil demand,” Li said.

“OPEC+ maintained its output. Oil prices may fall again if further production cuts are not implemented.”

China, the world’s second largest economy and top crude oil importer, has seen business and manufacturing activity suffer this year as a result of strict zero-tolerance measures aimed at containing the spread of the coronavirus.