Japan is now buying Russian crude above the $60 per barrel ceiling after OPEC+ cut production, pushing prices even higher.
The country is now the only G7 nation buying Russian crude above the cap agreed by the Allies after invading Ukraine.
The island nation has almost no fossil fuels of its own and relies on imports of gas, coal and oil to maintain its energy levels.
The move is a break from US-led efforts to enforce the $60 a barrel cap, but according to The Wall Street Journal, Japan got the US to agree to the exemption.
Japan is also the only G-7 nation not to have supplied arms to Ukraine, and Prime Minister Fumio Kishida was the last G-7 leader to visit the war-torn country following the Russian invasion.
Japan is now buying Russian crude above the $60 per barrel ceiling after OPEC+ cut production, pushing prices even higher
The move is a break from US-led efforts to enforce the $60 a barrel cap, but according to The Wall Street Journal, Japan got the US to agree to the exemption. Pictured: President Biden
Oil prices rose on Monday, posting the biggest daily rise in almost a year after OPEC+’s surprise announcement that it would further cut production rocked markets.
The shock reduction will begin in May and last through the end of the year, with OPEC+ saying on Monday that Algeria, Gabon, Iraq, Kazakhstan, Kuwait, Oman, Saudi Arabia and the United Arab Emirates will be affected.
It came on top of a decision by Russia, also an OPEC+ member, to extend a 500,000 barrel-per-day cut.
The oil cartel had already angered Washington in October by cutting production by two million barrels a day.
At the time, the White House accused OPEC+ of “linking up with Russia” and said the cuts would boost Moscow’s revenues and undermine Western sanctions imposed over its invasion of Ukraine.
Russia’s war in Ukraine fueled inflation when it pushed up energy prices last year, but crude prices have fallen since then.
Japan is also the only G-7 nation not to have supplied arms to Ukraine, and Prime Minister Fumio Kishida (pictured) was the last G-7 leader to visit after the Russian invasion
OPEC+ said in a statement Monday that Sunday’s move was a “precautionary measure to support oil market stability.”
The Kremlin also defended the decision, saying it was “in the interests of global energy markets for world oil prices to remain at good levels.”
“Whether other countries are happy with it or not is up to them,” Kremlin spokesman Dmitry Peskov told reporters.
“Markets caught off guard”
Sunday’s decision “caught markets off guard,” reversing recent oil price gains after fears of a global banking crisis eased, noted ActivTrades analyst Ricardo Evangelista.
“As the banking crisis eased and optimism returned to the markets, the barrel price was already showing signs of recovery,” he noted.
“The announcement of OPEC+ added to this momentum, sending oil prices back to pre-banking crisis levels.”
The news sparked huge gains for European energy companies and boosted London and Paris stock markets even as Frankfurt plummeted.
Shares in Britain’s BP and France’s TotalEnergies rose more than 5 percent in afternoon trade, while Shell rose 4.7 percent.
Oil giants enjoyed record profits last year as crude prices soared.
However, developments over the weekend also fueled concerns about a renewed rise in consumer prices, which could pressure central banks to raise interest rates even further – and hurt the global economy.
Prices longer higher?
Central banks have hiked interest rates to curb high inflation.
“There are real concerns that the surprise decision … will prompt central banks to keep interest rates high for longer because of the inflationary impact, which will hamper economic growth,” said Nigel Green, head of financial advisory deVere Group.
Global equities received a boost on Friday after data highlighted slowing inflation in the euro zone and the United States.
Green said that the rise in oil prices “is expected to increase production and transportation costs, reduce consumer spending power, disrupt supply chains and lead to higher inflation expectations.”
Crude oil prices have fallen over the past year as fears of a possible recession due to higher borrowing costs offset supply concerns sparked by sanctions against Russia over its war in Ukraine.
“The production cut … clearly shows that OPEC was not happy with the movement in oil prices, which had fallen in recent months,” said National Australia Bank’s Tapas Strickland.