Oil Prices Have Dropped

Oil prices fell to their lowest level in two months on Thursday as questions arose over how much the G7 would limit the offer for Russian oil prices.

Higher-than-expected fuel inventories in the US and tighter coronavirus controls in China weighed on oil prices.

Brent crude futures fell 52 cents, or 0.611%, to $84.89 a barrel. Meanwhile, WTI crude futures in the United States fell 15 cents, or 0.211%, to $77.79.

The news that the anticipated price cap on Russian oil might be higher than the current level caused both benchmarks to decline by more than 3% on Wednesday. However, the governments of the European Union have not yet agreed on a price, an official European claims that the G7 group is considering a cap on Russian seaborne oil at $65 to $70 per barrel.

A higher price cap might entice Russia to keep selling its oil, reducing the global oil supply shortage risk.

Oil prices dropped even further on Wednesday after the Energy Information Administration (EIA) revealed that US gasoline and distillate inventories rose significantly over the previous week.

However, crude inventories fell by 3.701 million barrels in the week ending Nov. 18, compared to a Reuters poll of analysts’ expectations for a 1.1 million barrel drop.

On Wednesday, China reported the highest daily COVID-19 case count since the pandemic started almost three years ago. To combat the outbreaks, local governments tightened regulations, which worried investors about the economy and fuel demand.

The sources claim that US officials and Venezuelan parties are pushing for talks this weekend in Mexico City. This meeting, which would be the first of its kind since October 2021, might open the door for the United States to lift its oil sanctions against Venezuela, an OPEC member.

EU Works on Rift Over Gas Price Cap

As winter approaches, European Union countries struggle to effectively protect 450 million citizens from significant increases in their gas bills as the cold weather sets in. They have been unable to get past their acrimonious differences.

The 27-nation bloc has been split into nearly irreconcilable blocs by the energy crisis linked to Russia’s war in Ukraine, as evidenced by an emergency meeting of energy ministers on Thursday.

A sharp increase in natural gas prices in August shocked all but the wealthiest EU citizens. This prompted the EU to look for a cap to contain the volatile prices causing inflation.

Energy Ministers Try Again to Break Impasse

Energy ministers are again attempting to break the impasse between countries like Germany and the Netherlands, who are adamant that a price cap could reduce supplies, and those like Greece, Spain, Belgium, France, and Poland, who want cheaper gas to lower household bills.

As a result of Moscow’s reduction in gas supplies to Europe, natural gas and electricity prices have skyrocketed. Russian officials have been charged with using energy as a weapon against EU nations for supporting Ukraine.

Therefore, reaching an agreement involves showing warmth to the populace and presenting Vladimir Putin with a unified front.

Even though a summit of EU leaders declared some breakthroughs last month, nothing has materialized due to the protracted negotiations. The EU Commission, the executive branch of the EU, should propose to set a threshold for a price cap, but when it did on Tuesday, there was shock and accusations that it couldn’t possibly work.

The overall share of Russian natural gas imports to the EU decreased from 40% before the invasion to around 7% due to trade disruptions linked to Russia’s war in Ukraine. And the amount of gas in storage has already greatly surpassed expectations and is almost full.