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Oil Slips 4% On Russian Price Cap Talks, U.S. Gasoline Build Up
(CTN NEWS) – Wednesday, the price of oil dropped by more than 4% as the Group of Seven (G7) countries discussed setting a price cap on Russian oil above the current market price.
And as gasoline inventories in the US increased more than analysts had anticipated.
By 12:19 p.m. ET, were down $3.80 to $84.56 per barrel, down 4.4%. (17:19 GMT). A barrel of U.S. crude dropped by $3.73, or 4.6%, to reach $77.22.
Both contracts had increased earlier in the session by more than $1/bbl.
According to the Energy Information Administration, gasoline stockpiles in the United States increased by 3.1 million barrels. Analysts predicted a 383,000-barrel build.
According to Price Futures Group analyst Phil Flynn, “the increase in gasoline is somewhat surprising.” “The increase in fuel supplies could indicate a decline in demand or more gasoline is being sold before the holidays.”
According to EIA statistics, crude stockpiles decreased by 3.7 million barrels as opposed to the 1.1 million barrel decline that analysts had predicted in a Reuters poll.
Reports that the G7 price cap on Russian oil may be higher than where it is now trading also hurt prices.
Prices were also hit by reports that the G7 price cap on Russian oil could be above the level it is trading
According to a European official on Wednesday, the G7 nations are considering setting a price restriction on Russian seaborne oil in the range of $65-70/bbl.
According to Refinitiv statistics, Urals crude shipped to northwest Europe is currently trading at about $62-$63/bbl. However, it is higher in the Mediterranean at about $67-$68/bbl.
The cap would still allow Russia to profit from selling its oil because production costs are predicted to be around $20 per barrel, preventing an oil shortage on the world market.
A senior U.S. Treasury official predicted that the price cap would likely be modified a few times a year.
The announcement increased concerns about the demand for crude oil in China, the world’s largest importer, which has been dealing with an increase in COVID-19 cases as Shanghai tightened regulations late on Tuesday.
An OECD economic outlook that predicts a slowdown in the growth of the world economy in 2013 added to the strain.
The OECD does not predict a worldwide recession, which may have contributed to oil prices and stock prices strengthening further, according to analyst Tamas Varga at PVM Oil Associates.
According to Varga, the U.S. Federal Reserve’s November policy meeting minutes, which are due at 1900 GMT, will also be watched by the market for hints about potential economic contraction and future rate increases.
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