RIYADH: Oil trickled down on Thursday, hovering around two-month lows, as the proposed price cap on Russian oil from the Group of Seven nations was considered higher than the current trading levels, alleviating concerns over tight supply.
A greater-than-expected build in US gasoline inventories and widening COVID controls in China added to the downward pressure.
Brent crude futures dipped 21 cents, or 0.3 percent, to $85.20 a barrel by 0431 GMT, while US West Texas Intermediate crude futures fell by 16 cents, or 0.2 percent, to $77.78 a barrel.
EU split on Russian oil price cap level
EU governments failed to reach a deal on Wednesday at what level to cap prices for Russian sea-borne oil under the G7 scheme and will resume talks on Thursday evening or on Friday, EU diplomats said.
Earlier on Thursday representatives of the EU’s 27 governments met in Brussels to discuss a G7 proposal to set the price cap in the range of $65-$70 per barrel, but the level proved too low for some and too high for others.
“There are still differences on the price cap level. We need to proceed bilaterally,” one EU diplomat said. “The next meeting of ambassadors of EU countries will be either tomorrow evening or on Friday,” the diplomat said.
The G7, including the US, as well as the whole of the EU and Australia, are slated to implement the price cap on sea-borne exports of Russian oil on Dec. 5.
The move is part of sanctions intended to slash Moscow’s revenue from its oil exports so it has less money to finance its invasion of Ukraine.
But the level of the price cap level is a contentious issue — Poland, Lithuania and Estonia believe the $65-$70 per barrel would leave Russia with too high a profit, since production costs are around $20 per barrel.
Cyprus, Greece and Malta — countries with big shipping industries that stand to lose the most if Russian oil cargos are obstructed — think the cap is too low and demand compensation for the loss of business or more time to adjust.
“Poland say they can’t go above $30 per barrel. Cyprus wants compensation. Greece wants more time. It is not going to happen tonight,” a second diplomat said.
US drillers add oil and gas rigs for second month in a row: Baker Hughes
US energy firms this week added oil and natural gas rigs for a fourth week and second month in a row as relatively high oil prices encourage firms to drill more.
The oil and gas rig count, an early indicator of future output, rose two to 784 in the shortened week to Nov. 23, its highest since March 2020, energy services firm Baker Hughes Co. said in its closely followed report on Wednesday.
Baker Hughes issued the weekly rig report two days ahead of schedule due to the US Thanksgiving Day holiday.
US oil rigs rose four to 627 this week, their highest since March 2020, while gas rigs fell two to 155.
For the month, drillers added 16 rigs, the most since June, putting the total count up for a second month in a row for the first time.
In November, drillers added 17 oil rigs, and cut one gas rig.
Even though the rig count increased during most months over the past two years, weekly increases have mostly been in the low single digits so far in 2022, keeping oil production below record levels seen before the pandemic as many companies focus more on returning money to investors and paying down debt rather than boosting output.
The government forecasts US crude production to rise from 11.3 million barrels per day in 2021 to 11.8 million bpd in 2022 and 12.3 million bpd in 2023, which matches the record high in 2019.
(With input from Reuters)