Oil Prices Fall for 3rd Week in Row as Plan to Cap Russian Selling Price Stays in Limbo

By Staff, Agencies

Crude prices fell for a third straight week after European officials failed to agree on a price cap for Russian oil despite debating a level thought to be more generous than one that could risk retaliation from the Kremlin in the form of production or export cuts.

A record number of new coronavirus cases in No. 1 oil importing nation China, which made local authorities more determined to hold on to the country’s tough Zero-COVID policy, also weighed on crude prices.

Thinner-than-usual trading volumes after Thursday’s Thanksgiving holiday, an event that typically prompts traders to take longer breaks until the weekend, added to the market’s somber mood.

New York-traded West Texas Intermediate, or WTI, settled down $1.66, 2.1%, at $76.28 per barrel. The US crude benchmark, which hit a 10-month low beneath $76 on Monday, was down 4.5% for the week, after back-to-back losses of 10% and 4% in weeks prior.

London-traded Brent settled down $1.71, or 2%, at $83.63. The global crude benchmark, which plunged to a nine-month low of under $83 on Monday, was down 4.5% for the week, after back-to-back losses of 9% and 3% in weeks prior.

Officials from the Group of Seven nations, or G7, have been discussing a Russian oil price cap between $65 and $70 a barrel with their European Union diplomatic counterparts over the past few days, but have been unable to reach an agreement, reports said.

The G7 and EU are aiming to limit the revenue from oil that could fund Moscow's military offensive in the Ukraine without disrupting global oil markets. But the proposed level is broadly in line with what Asian buyers are already paying. Several market experts have also said the oil price cap was basically a political gimmick that would do little to impact Russia’s ongoing oil trades. Moscow, for its part, has steadfastly refused to sell oil to any buyer that participates in the G7-EU plan, making the cap even less workable.

Despite the double whammy of the deadlock on the Russian oil price cap and tumbling Chinese demand for oil amid a coronavirus outbreak, some traders said they expected crude prices to climb next week in anticipation of remedial action by the OPEC+ oil producing alliance when it meets Dec. 4.

OPEC+ – which groups OPEC, or the 13-member Saudi-led Organization of the Petroleum Exporting Countries, with 10 other oil producers steered by Russia – already has an agreement to cut production by 2 million barrels per day till end of next year to boost Brent and US crude prices, which have fallen some 40% from their March highs.

Earlier this week, Saudi Energy Minister Abdulaziz bin Salman indicated that OPEC+ will likely add to those cuts when it meets Dec. 4.