Oil rising as markets sag China demand worries, ambiguity surrounding Russia’s price cap

After a week characterized by concerns over Chinese demand and negotiations over a Western price ceiling on Russian oil, oil prices increased in Asia on Friday despite low market liquidity.

At 0730 GMT, the price of Brent crude futures increased by 41 cents, or 0.48%, to $85.75 a barrel.

American West Texas Intermediate (WTI) crude futures increased by 57 cents or 0.73% from their previous closing price of $78.51 a barrel on Wednesday.
Due to Thanksgiving in the United States, there was no WTI settlement on Thursday.

Both contracts were still on course to decrease by 2% or more as concerns about a shortage of supply eased, marking their third straight weekly decline.

According to Virendra Chauhan, chief APAC analyst at Energy Aspects, the main pricing influences at this time are limited liquidity, worries about China demand, and the uncertainty surrounding how severe the recession may be.

An ANZ note revealed that there are increasing indications that a rise in COVID-19 cases in China, the world’s largest oil importer, is beginning to affect fuel demand. Traffic is dwindling, and suggested oil demand is approximately 13 million barrels per day, or 1 million bpd below average.

As cities around the nation continued to apply mobility restrictions and other constraints to prevent outbreaks, China on Friday announced a new daily record for COVID-19 infections.

According to Tina Teng, a markets analyst at CMC, the rise in COVID cases in China continues to have a negative demand impact on oil prices.

G7 and European Union officials have been debating a restriction on Russian oil prices between $65 and $70 a barrel in order to prevent any disruptions to the world oil markets and limit the amount of money that can be used to support Moscow’s military effort in Ukraine.

Vladimir Putin, the president of Russia, has already stated that Moscow will stop supplying oil and gas to any nations who support the price ceiling; the Kremlin reaffirmed this position on Thursday.

Trading is anticipated to remain cautious ahead of an agreement on the price ceiling, which is scheduled to take effect on December 5 when an EU ban on Russian oil goes into effect, and ahead of the upcoming OPEC+ summit on December 4.

The Saudi Arabian Energy Minister Prince Abdulaziz bin Salman was quoted as saying this week that OPEC+ was prepared to cut output even more if necessary. OPEC+ agreed in October to drop its output target by 2 million barrels per day through 2023.

Source: Reuters.

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