Oil Prices Slump Amid G7 Uncertainty
By Adedapo Adesanya
Oil prices edged lower on Thursday, hovering around two-month lows as the level of a proposed Group of Seven (G7) nations cap on the price of Russian oil raised doubts.
Brent crude futures were down 28 cents or 0.3 per cent to $85.13 a barrel, while the United States West Texas Intermediate (WTI) crude futures fell by 5 cents or 0.1 per cent to $77.89 per barrel.
The G7 group of nations is looking at a cap on Russian seaborne oil at $65-$70 a barrel, a European official said, though European Union governments have yet to agree on a price.
On Thursday, Russia said it does not plan to supply oil and gas to countries that support the cap, but it will make a final decision once it analyses the figures.
European Union governments failed to reach a deal at what level to cap prices for Russian sea-borne oil under the Group of Seven nations (G7) scheme.
The G7, including the United States, as well as the whole of the European Union and Australia, are slated to implement the price cap on sea-borne exports of Russian oil on December 5.
The move is part of sanctions intended to slash Moscow’s revenue from its oil exports, so it has less money to finance its invasion of Ukraine.
But the level of the price cap level is a contentious issue – Poland, Lithuania, and Estonia believe the $65-$70 per barrel would leave Russia with too high a profit since production costs are around $20 per barrel.
Cyprus, Greece and Malta – countries with big shipping industries that stand to lose the most if Russian oil cargos are obstructed – think the cap is too low and demand compensation for the loss of business or more time to adjust.
Pressure also came as China registers near-record numbers of new COVID-19 infections daily—close to the April 2022 peak when the financial centre Shanghai was under lockdown for weeks—likely depressing fuel demand as 48 Chinese cities currently have some form of restrictions on movements.
On Wednesday alone, China 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, adding to investor concern over the economy and fuel demand.
Shanghai is again restricting some movement, with travellers to the city barred from most public places for five days after their arrival.
Trading volumes were, however, thin on Thursday because of the Thanksgiving holiday in the US.