Business

Oil rises as market weighs China demand concerns, Russia price cap uncertainty



© Reuters. A view shows the bulk cargo ship Yan Dun Jiao 1 at the Vostochny container port on the shores of the Gulf of Nakhodka near the port city of Nakhodka, Russia August 12, 2022. REUTERS/Tatiana Meel

By Sonali Paul and Trixie Sher Li Yap

SINGAPORE (Reuters) – Oil prices rose in Asia on Friday, despite low market liquidity, after a week marked by concerns about Chinese demand and haggling over a Western price ceiling for oil. with Russian oil.

Futures were up 41 cents, or 0.48%, to trade at $85.75 a barrel by 07:30 GMT.

U.S. West Texas Intermediate (WTI) crude oil futures were up 57 cents, or 0.73%, from nearly $78.51 a barrel on Wednesday. No WTI deal on Thursday due to US Thanksgiving holiday.

Both contracts are still heading for a third straight week of losses, on track to drop about 2% or more on concerns about easing tight supply.

Virendra Chauhan, chief analyst for APAC at Energy Aspects, said weak liquidity, concerns around Chinese demand and a backdrop of an assessment of the severity of the economic downturn were factors driving prices. main.

There are growing signs that the increase in COVID-19 infections in China, the world’s top oil importer, is starting to affect fuel demand, with reduced traffic volumes and implications. oil demand is about 13 million bpd, or 1 million bpd below average. , an ANZ note shows.

China on Friday reported a new daily record in the number of COVID-19 infections, as cities across the country continued to enforce movement and other containment measures to control the epidemic. outbreak.

Tina Teng, market analyst at CMC, said the resurgence of COVID-19 cases in China remains the main bearish factor affecting oil prices from a demand perspective.

On Russia’s oil price cap, G7 and European Union diplomats discussed levels between $65 and $70 a barrel, with the aim of limiting revenue to finance Moscow’s military offensive. in Ukraine without disrupting the global oil market.

“The market thinks (the price ceiling) is too high, which reduces the risk of Moscow retaliation,” ANZ Research analysts said in a note to clients.

Russian President Vladimir Putin has said Moscow will not supply oil and gas to any country participating in the price ceiling, something the Kremlin reiterated on Thursday.

Trading is expected to remain cautious ahead of a deal on a price ceiling, which will come into effect on December 5 when the EU’s ban on Russian crude begins, and ahead of the Organization’s next meeting. The Petroleum Exporting Countries and their allies, known as OPEC+, on December 4.

In October, OPEC+ agreed to reduce its output target of 2 million barrels per day until 2023, and Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman, was quoted as saying this week that OPEC+ was ready to cut. reduce production further if necessary.

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