Oil prices have risen amid concerns that a new cap on the price of Russian crude could disrupt global supplies in the coming months.
A separate decision by major oil-producing countries to keep cutting how much they produce to prop up prices has also fuelled the rise.
The price of Brent crude oil rose by almost 2% on Monday to $87.25 a barrel.
But this is still well below the highs seen after Russia invaded Ukraine.
Higher oil prices tend to push up petrol prices and the cost of living which, in the UK, is rising at its fastest pace in 41 years.
Price cap
On Monday, the G7 group of major economies implemented a cap on the price of Russian oil at $60 a barrel to “prevent Russia from profiting from its war of aggression against Ukraine”.
It will stop any Russian crude sold for more than that price from being shipped using G7 and EU tankers, insurance companies and credit institutions. Many major global shipping and insurance companies are based within the G7.
However, Russia – which is the world’s second biggest producer of crude oil – has said it will not accept the price cap and threatened to stop exporting oil to countries adopting the measures.
Jorge Leon, senior vice-president at Norwegian energy consultancy Rystad Energy, told the BBC’s Today programme that oil prices could increase as a result.
“Russia has been very clear that they will not sell crude [oil] to anybody signing up to the price cap,” he said.
“So probably what’s going to happen is that we will see some disruptions in the coming months and therefore probably oil prices are going to start increasing again in the coming weeks.”
Meanwhile, on Sunday the group of top oil-producing countries known as Opec+ said it would stick to its policy of reducing output to prop up global prices.
Opec+ is made up of 23 oil-exporting countries, including Russia, who regularly meet to decide how much crude oil to sell on the world market.
In the wake of Russia’s invasion of Ukraine, global oil prices soared to more than $120 a barrel amid concerns about a shortfall in global supplies from Russia.
But they have fallen sharply since then as the global economy slows down and countries use less oil.
“This decision by Opec+ to keep the quota where it is… is by itself an implicit sort of support to the oil market,” Kang Wu of S&P Global Commodity Insights told the BBC.
Analysts said oil prices had also been boosted by the easing of Covid restrictions in some Chinese cities, which could lead to an increase in demand for oil.
More cities in China, including Urumqi in the north west, have said they will loosen strict lockdown rules after mass protests against the country’s zero-Covid policy.
The $60 cap on Russian oil comes on top of an EU embargo on imports of Russian crude oil by sea and similar pledges by the US, Canada, Japan and the UK.
But this weekend Ukraine President Volodymyr Zelensky called the cap “a weak position” that was not “serious” enough to damage the Russian economy.
While the measures will most certainly be felt by Russia, the blow will be partially softened by its move to sell its oil to other markets such as India and China, who are currently the largest single buyers of Russian crude oil.
On Monday, Kremlin spokesman Dmitry Peskov said Russia would respond to the latest measures, adding that they would not stop its military campaign in Ukraine.
“Russia and the Russian economy have the required capacity to fully meet the needs and requirements of the special military operation,” Peskov told reporters.
BBC
