Oil stable, but set to end week firmer

London — Oil futures were broadly stable on Friday, but were poised to end the week up, ahead of a meeting by the oil cartel Opec and its allies (Opec+) on Sunday and an EU ban on Russian crude oil kicking in on Monday.

Brent crude futures were up 14c, or 0.2%, at $87.02 a barrel by 10.08am GMT. US West Texas Intermediate (WTI) crude futures inched up 5c, or 0.1%, to $81.27 a barrel.

Both Brent and WTI had dipped earlier in the session, but were on track for their first weekly gains — the biggest in two months at about 4% and 6%, respectively — after three consecutive weeks of decline.

Sending bullish signals, China is set to announce an easing of its Covid-19 quarantine protocols within days, sources told Reuters, which would be a major shift in policy in the world’s second-biggest oil consumer, though analysts warn a significant economic reopening is likely months away.

Also underpinning oil prices, the dollar, which typically trades inversely with oil, hit five-month lows.

Meanwhile, EU governments tentatively agreed on a $60 a barrel price cap on Russian seaborne oil with an adjustment mechanism to keep the cap at 5% below the market price, according to diplomats and a document seen by Reuters.

This still needs formal approval before the bloc’s sanctions on Russian crude kick in on December 5. Russian Urals crude traded at about $70 a barrel on Thursday afternoon.

Poland, which had pushed for the cap to be as low as possible, had not confirmed that it would support the deal, an EU diplomat said.

Opec+ is widely expected to stick to its latest target of reducing oil production by 2-million barrels a day (bbl/day) when it meets on Sunday, but some analysts believe that crude prices could fall if the group does not make further cuts.

“This week’s price rebound has taken Brent to within touching distance of the $90/bbl threshold and may temper appetite among (Opec+’s) leadership for fresh price-supportive cuts,” said PVM analyst Stephen Brennock.

“That being said, the prospect of subdued Chinese oil demand and more US [strategic petroleum reserve] releases could prompt pre-emptive action by the alliance. Either way, the ingredients are there for price fireworks come Monday morning.” 

Reuters