Oil muted as price cap proposal eases supply worries

  • The G7 price cap on Russian oil may be above current trading levels
  • EIA data for petrol stocks shows a higher building than expected
  • COVID-19 controls are being tightened in China

Nov 24 (Reuters) – Benchmark Brent crude fell on Thursday, while West Texas Intermediate (WTI) crude held steady and hovered within sight of two-month lows as the level of a proposed G7 cap on the price of Russian oil rose doubts about how much it would limit supply.

A larger-than-expected build in US gasoline inventories and expanding COVID-19 controls 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.

Trading volume was thin due to the US Thanksgiving holiday.

Both benchmarks plunged more than 3% Wednesday on news that the planned price cap on Russian oil may be above current market levels.

EU governments remained divided over what level to cap Russian oil prices to curb Moscow’s ability to pay for its war in Ukraine without causing a global oil supply shock, with more talks possible on Friday if positions converge. Read more

The G7 group of nations is looking at a ceiling for Russian seaborne oil of $65-$70 a barrel, a European official said, although EU governments have yet to agree on a price.

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

Some Indian refiners pay the equivalent of a discount of about $25 to $35 per barrel. barrel to international benchmark Brent crude for Russian Ural crude, two sources said. Urals is Russia’s main export crude oil.

“The Russian price cap is another catalyst that has served to push prices lower over the last while,” said Bart Melek, global head of commodities 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 (EIA) said on Wednesday that US gasoline and distillate inventories rose significantly last week.

But crude oil inventories ( USOILC=ECI ) fell 3.7 million barrels to 431.7 million barrels in the week to Nov. 18, compared with expectations for a 1.1 million-barrel drop in a Reuters poll of analysts.

China on Wednesday reported the highest number of daily COVID-19 cases since the start of the pandemic nearly three years ago. Local authorities tightened controls to stamp out the outbreaks, raising investor concerns about the economy and fuel demand.

Reporting by Ahmad Ghaddar; Additional reporting by Nia Williams in British Columbia, Ahmad Ghaddar in London, Yuka Obayashi in Tokyo and Muyu Xu in Singapore; Editing by Marguerita Choy, Mark Potter and Daniel Wallis

Our standards: Thomson Reuters Trust Principles.

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