© Reuters. FILE PHOTO: Oil pump jacks are seen at the Vaca Muerta oil and gas field in the Patagonia region of Neuquen, Argentina, January 21, 2019. REUTERS/Agustin Marcarian/File Photo/File Photo
By Yuka Obayashi
TOKYO (Reuters) – Oil fell on Thursday, hovering around a two-month low, as the price of Russian crude from the Group of Seven (G7) group appeared to be higher than today’s trading levels, easing concerns about an oil glut.
Larger-than-expected construction in US oil refineries and the tightening of COVID-19 restrictions in China have added to the downside.
Futures were down 21 cents, or 0.3%, at $85.20 a barrel by 0431 GMT, while U.S. West Texas Intermediate (WTI) crude futures were down 16 cents, or 0.2%, at $77.78 a barrel.
Both benchmarks fell more than 3% on Wednesday on speculation that Russian oil prices may be above current market levels.
The G7 is looking at a cap on Russian oil at $65-$70 a barrel, according to a European official, although the governments of the European Union have not agreed on the price.
The $65-$70 range may be higher than market expectations, Commonwealth Bank commodity analyst Vivek Dhar said in a report. It would reduce the risk of global disruption, Dhar said.
“If the EU agrees to lower oil prices of $65-$70/bbl this week, we see risks to our expectation of oil prices of $95/bbl this quarter,” said Dhar.
The Commonwealth Bank’s forecasts suggest that EU sanctions coupled with Russian oil prices could disrupt food supply enough to deal with global concerns, he said.
Some Indian and Chinese refiners are paying lower prices for the Urals, traders said. The Urals are the main export of Russia.
EU governments will resume talks on the tariff on Thursday or Friday, according to EU diplomats.
Oil prices were also under pressure after the Energy Information Administration (EIA) reported on Wednesday that US crude and oil inventories rose sharply last week. The increase eased some concerns about a market downturn. [EIA/S]
But crude fell by 3.7 million barrels in the week to Nov. 18 to 431.7 million barrels, compared with analysts’ expectations in a Reuters poll of a fall of 1.1 million barrels.
“EU oil sanctions aside, as long as the shutdowns continue to expand, the oil market’s appetite will remain low,” said Stephen Innes, managing partner at SPI Asset Management, in a statement.
China on Wednesday reported the highest number of daily cases of COVID-19 since the outbreak began nearly three years ago. Local officials have urged restrictions to curb epidemics, adding to business concerns about the economy and oil demand.
Meanwhile, Chevron Corp (NYSE: ) will soon receive U.S. approval to expand operations in Venezuela and resume oil sales as the Venezuelan government and its opposition resume political talks, four people familiar with the matter said on Wednesday.
Both Venezuelan parties and US officials are pushing for talks in Mexico City later this week, the people said. They will be the first talks of this kind since October 2021 and could lead to the reduction of US oil sanctions on the country, a member of the Organization of the Petroleum Exporting Countries (OPEC).