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Oil prices fall over US$1/barrel on Russian oil price cap talks

Oil prices fall over US$1/barrel on Russian oil price cap talks

FILE PHOTO: Pumpjacks are seen against the setting sun at the Daqing oil field in Heilongjiang province, China December 7, 2018. Picture taken December 7, 2018. REUTERS/Stringer

LONDON: Oil prices fell by more than US$1 a barrel on Wednesday as the Group of Seven (G7) nations looked at a price cap on Russian oil above where the crude grade is currently trading.

Brent crude futures fell US$1.62, or 1.83 per cent, to US$86.74 a barrel at 11.01am GMT, while US West Texas Intermediate (WTI) crude futures were down US$1.25, or 1.54 per cent, at US$79.70 a barrel.

Both contracts rose by more than US$1/barrel earlier in the day, but "pared gains following reports that the G7 price cap on Russian oil could be above the level it is trading at the moment", said Giovanni Staunovo, commodity analyst at UBS.

G7 nations are looking at a price cap on Russian seaborne oil in the range of US$65-US$70/barrel, according to a European official on Wednesday.

Meanwhile, Urals crude delivered to northwest Europe is trading around US$64/barrel, according to Refinitiv data.

A senior US Treasury official said on Tuesday that the price cap will probably be adjusted a few times a year.

The news added to demand concerns relating to top crude oil importer China, which has been grappling with a surge in COVID-19 cases, with Shanghai tightening rules late on Tuesday.

Also adding pressure was an OECD economic outlook that sees a deceleration in global economic expansion next year.

"On the bright side, the OECD does not envisage a global recession and maybe this helped oil prices and stocks strengthen further," said analyst Tamas Varga at PVM Oil Associates.

The market also awaits the minutes from the US Federal Reserve's November policy meeting due at 7pm GMT for clues on possible economic contraction and further rate hikes, Varga said.

The price decline was limited by a fall in US crude inventories, which were down by about 4.8 million barrels for the week ended Nov. 18, data from the American Petroleum Institute showed, according to market sources.

US stock data from the Energy Information Administration (EIA) is due at 10.30am on Wednesday.

Source: Reuters/ga

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