Oil turns lower with EU discussing Russia price cap at US$65-US$70

TORONTO (Nov 23) Oil fell as the EU discussed imposing a price cap on Russian oil between US$65 and US$70 a barrel. 

West Texas Intermediate dropped below US$80 a barrel, after a run of recent volatility that on Monday pushed prices to the lowest since January. The European Union's discussions on Russian oil exports come as ambassadors meet Wednesday with the aim of approving the mechanism. The cap level could be close to the current Russian price given it has been selling at discounts of about US$20 a barrel in recent months.

Russia has said that it won't sell crude to nations that use the cap, which is designed to punish Moscow for its invasion of Ukraine while keeping the nation's oil flowing.

“A US$65-US$70 price cap on Russian oil would not mean that much considering the discount Urals is currently selling at,” said Ole Hansen, head of commodities strategy at Saxo Bank. “The market is struggling to make its mind up given the multiple uncertainties regarding supply and demand.”

Crude prices have suffered several sharp downturns in recent days as the market for real-world barrels has softened markedly. Demand in China, the world's largest importer, continues to suffer as the country presses on with COVID Zero curbs. Beijing asked residents not to leave the city unless necessary, to curb the spread of the virus.

BNN Bloomberg