November 30, 2022

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Oil prices softened as a proposed price cap eased supply concerns

Oil prices softened as a proposed price cap eased supply concerns

  • The G7 price ceiling on Russian oil could be higher than the current trading level
  • Gasoline inventory data from the Energy Information Administration (EIA) shows a higher-than-expected build
  • Tightening of COVID-19 controls in China

(Reuters) – Benchmark Brent crude fell on Thursday while West Texas Intermediate (WTI) crude settled, soaring within sight of a two-month low as a proposed G7 ceiling level for Russian oil prices raised doubts about how that might play out. Too much would limit supply.

The larger-than-expected rise in US gasoline inventories and the expansion of the coronavirus outbreak in China also added downward pressure on crude oil prices.

Brent crude futures were down 29 cents, or 0.3%, at $85.12 a barrel by 15.15 PM ET (2015 GMT), while WTI futures were up 2 cents, at $77.96.

Trading volumes were thin due to the Thanksgiving holiday in the US.

Both benchmarks fell more than 3% on Wednesday on news that the planned price ceiling for Russian oil could be higher than the current market level.

European Union governments have remained divided over the level of a cap on Russian oil prices to rein in Moscow’s ability to pay for its war in Ukraine without shocking global oil supplies, with more talks possible on Friday if the positions converge. Read more

A European official said that the Group of Seven major countries is studying a ceiling for Russian seaborne oil at 65 to 70 dollars per barrel, although the European Union governments have not yet agreed on the price.

A higher price ceiling could make it more attractive for Russia to continue selling its oil, reducing the risk of supply shortages in global oil markets.

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Two sources said some Indian refiners are paying the equivalent of a discount of between $25 and $35 per barrel of international benchmark Brent crude for Russia’s Urals. Urals is Russia’s main export ore.

“The Russian price cap is another catalyst that has helped drive prices down over the past few period,” said Bart Melek, global head of commodity market strategy at TD Securities, adding that he was fairly bullish on oil despite the headwinds.

Oil prices also came under pressure after the Energy Information Administration said on Wednesday that US gasoline and distillate inventories rose significantly last week.

But crude stocks (USOILC = ECI) It fell by 3.7 million barrels to 431.7 million barrels in the week ending November 18, compared to expectations for a decline of 1.1 million barrels in a Reuters poll of analysts.

China on Wednesday reported the highest number of daily COVID-19 cases since the start of the epidemic nearly three years ago. Local authorities have tightened controls to stem the outbreak, adding to investor concerns about the economy and fuel demand.

Narrated by Ahmed Ghaddar. Additional reporting by Nia Williams in British Columbia, Ahmed Ghaddar in London, Yuka Obayashi in Tokyo, and Muyu Show in Singapore. Editing by Margarita Choi, Mark Potter, and Daniel Wallis

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