Oil muted as price cap proposal eases supply concerns

  • G7 price cap on Russian oil could be above current trade levels
  • EIA data on gasoline stocks show higher-than-expected build
  • COVID-19 controls tighten in China

Nov 24 (Reuters) – Benchmark Brent oil fell lower on Thursday as West Texas Intermediate (WTI) crude held steady, floating within sight of two-month lows as the level of a proposed G7 cap on the price of Russian oil casts doubts raised concerns about how it would severely restrict supply.

A larger-than-expected buildup in US gasoline inventories and increasing COVID-19 controls in China also put downward pressure on crude oil prices.

Brent crude oil futures fell 29 cents, or 0.3%, to $85.12 a barrel at 3:15 pm ET (2015 GMT), while US WTI crude oil futures rose 2 cents to $77. 96.

Trading volumes were thin due to the Thanksgiving holiday in the United States.

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

European Union governments remained divided over the level at which Russian oil prices should be capped to curb Moscow’s ability to pay for the war in Ukraine without causing a global oil supply shock. More talks are possible on Friday if the positions coincide. read more

The G7 group of countries is looking at capping Russian marine oil at $65-$70 a barrel, a European official said, though European Union governments have yet to agree on a price.

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

Some Indian refiners are paying the equivalent of a rebate of about $25 to $35 per barrel on international benchmark Brent oil for Russian Urals oil, two sources said. The Urals is Russia’s main crude oil.

“The Russian price cap is another catalyst that has pushed prices down in recent times,” said Bart Melek, Global Head of Commodity Market Strategy at TD Securities, adding that he was fairly bullish on oil despite the headwind.

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

But crude oil inventories (USOILC=ECI) fell 3.7 million barrels to 431.7 million barrels for the week ended Nov. 18, compared to expectations for a fall of 1.1 million barrels in a Reuters analyst poll. .

China on Wednesday reported its highest number of daily COVID-19 cases since the start of the pandemic nearly three years ago. Local authorities have tightened controls to quell the outbreaks, adding to 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; Edited by Marguerita Choy, Mark Potter and Daniel Wallis

Our Standards: The Thomson Reuters Principles of Trust.

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