Oil Prices Rise Amidst Russian Price Cap Dispute
Oil prices saw an uptick in Asia despite limited market activity, following concerns about Chinese demand and negotiations concerning a Western-imposed cap on Russian oil.Oil up amid wrangling over Russian oil price cap
Brent crude futures increased by 0.33 percent, reaching $85.62 a barrel at 0410 GMT. Similarly, US West Texas Intermediate (WTI) crude futures rose by 0.49 percent, hitting $78.43 a barrel after Wednesday’s closing. Thursday had no WTI settlement due to the US Thanksgiving holiday.
Both contracts were on course for a third consecutive weekly decline. Potentially dropping by about 2 percent as concerns over tight supply eased.
Stephen Innes, managing partner at SPI Asset Management, noted, “Oil is trading slightly higher in thin holiday-type trading. Possibly finding support from lower global interest rates.”
Regarding the Russian oil price cap, G7 and European Union diplomats have been in discussions, proposing levels between $65 and $70 a barrel. Their aim is to limit revenue that could fund Moscow’s military activities in Ukraine without disrupting global oil markets.
ANZ Research analysts highlighted that the market views these price caps as too high, reducing the risk of retaliation from Moscow.
Russian President Vladimir Putin has affirmed that Moscow will halt oil and gas supplies to countries supporting the price cap, a stance reiterated by the Kremlin on Thursday. Oil up amid wrangling over Russian oil price cap
Market Caution: Oil Caps, OPEC+ Meeting, Chinese Demand
Market caution prevails pending an agreement on the price cap, slated to commence on Dec 5 alongside an EU ban on Russian crude. Traders are also cautious ahead of the Dec 4 meeting of the Organisation of the Petroleum Exporting Countries and allies (Opec+).
In October, Opec+ agreed to lower its output target by two million barrels per day through 2023. Saudi Arabian Energy Minister Prince Abdulaziz bin Salman mentioned the readiness of Opec+ to further cut output if required.
Simultaneously, there are indications that the surge in Covid-19 cases in China, the world’s top oil importer, is impacting fuel demand. An ANZ note revealed a decline in traffic, suggesting an implied oil demand of around 13 million barrels per day, 1 million bpd lower than average.
China reported a new daily record for Covid-19 infections on Friday, leading cities across the country to enforce mobility restrictions and other measures to control outbreaks.
“This remains a challenge for oil demand, coupled with weakness in the US dollar, creating a negative backdrop for oil prices,” ANZ stated in a separate commodity note.”
