Crude dips on doubts about Russian price cap

London — Oil prices fell on Thursday to around two-month lows as the level of a proposed G7 cap on the price of Russian oil raised doubts about how much it would limit supply.

A bigger-than-expected build-up of US petroleum inventories and widening Covid-19 controls in China also added downward pressure on crude prices.

Brent crude futures dipped 52c, or 0.6%, to $84.89 a barrel by 12.19pm GMT, while US West Texas Intermediate fell 15c, or 0.2%, to $77.79.

Both benchmarks plunged more than 3% on Wednesday after news that the planned price cap on Russian oil could be above the current market level.

The G7 group of nations is looking at a ceiling on Russian seaborne oil at $65-$70 a barrel, a European official said, though EU governments have yet to agree on a price.

Officials will resume talks on the price cap later on Thursday or Friday, EU diplomats said.

A higher price cap could make it attractive for Russia to continue to sell its oil, reducing the risk of a supply shortage in global oil markets.

Russian officials said on Thursday the government doesn’t plan to supply oil and gas to countries that support the cap, but it will make a final decision once it analyses the figures.

“When one considers that the current Russian export price is below the proposed limit, the price cap automatically implies uninterrupted Russian exports,” said PVM Oil analyst Tamas Varga.

Some Indian and Chinese refiners are paying prices below the proposed cap for Urals crude, traders said. Urals is Russia’s main export variety.

Oil prices also came under pressure after the Energy Information Administration (EIA) said on Wednesday that US petroleum and distillate inventories rose substantially last week.

But crude inventories fell by 3.7-million barrels to 431.7-million barrels in the week to November 18, compared with expectations for a 1.1-million barrel decline in a survey of analysts.

China on Wednesday reported the highest number of daily Covid-19 cases since the start of the pandemic almost three years ago. Local authorities tightened controls to stamp out the outbreaks, adding to investors’ concerns about the economy and fuel demand.

Meanwhile, Chevron could soon secure US approval to expand operations in Venezuela and resume trading its oil once the Venezuelan government and its opposition resume political talks, four people familiar with the matter said on Wednesday.

Venezuelan parties and US officials are pushing to hold talks in Mexico City at the weekend, the sources said. It would be the first such talks since October 2021 and could pave the way for easing US oil sanctions on the Opec member.