Oil Drops As Russian Price Cap Bid Eases Fears Of Tight Supply
Oil declined on Thursday, hovering around two-month lows, as the Group of Seven(G7) nations' proposed range for a price cap on Russian oil was higher than current trading levels, alleviating concerns over tight supply.
Photo Insert: Brent crude futures dipped 50 cents, or 0.6%, to $84.91 a barrel by 0702 GMT, while US West Texas Intermediate (WTI) crude futures fell by 46 cents, or 0.6%, to $77.48 a barrel.
A greater-than-expected build up in US gasoline inventories and widening COVID-19 controls in China added to downward pressure, Yuka Obayashi reported for Reuters.
Brent crude futures dipped 50 cents, or 0.6%, to $84.91 a barrel by 0702 GMT, while US West Texas Intermediate (WTI) crude futures fell by 46 cents, or 0.6%, to $77.48 a barrel. Both benchmarks plunged more than 3% on Wednesday on news the planned price cap on Russian oil could be above the current market level.
The G7 is looking at a cap on Russian seaborne oil at $65-$70 a barrel, according to a European official, though European Union governments have not yet agreed on a price.
A higher price cap could make it attractive for Russia to continue to sell its oil, reducing the risk of a supply shortage in global oil markets. That range would also be higher than markets had expected, reducing the risk of global supply being disrupted, said Vivek Dhar, a commodities analyst at Commonwealth Bank in a report.
"If the EU agree to an oil price cap of $65‑$70/bbl this week, we see downside risks to our oil price forecast of $95/bbl this quarter," Dhar said. Commonwealth Bank's $95/bbl forecast was based on the assumption that EU sanctions and a price cap on Russian oil would disrupt enough supply to offset global growth concerns, Dhar said.
Some Indian and Chinese refiners are paying prices below the proposed price cap level for Urals crude, traders said. Urals is Russia's main export crude. EU governments will resume talks on the price cap on Thursday or Friday, according to EU diplomats.