After a week characterized by concerns over Chinese demand and negotiations over a Western price ceiling on Russian oil, oil prices increased in Asia on Friday despite low market liquidity.
The price of Brent crude futures increased by 28 cents, or 0.33%, to $85.62 a barrel. From Wednesday’s finish of $78.43 a barrel, U.S. West Texas Intermediate (WTI) oil futures increased by 49 cents, or 0.49%. Due to Thanksgiving in the United States, there was no WTI settlement on Thursday.
Despite lessening concerns about a shortage of supplies, both contracts were still on course to fall by approximately 2%. This is for the third straight week. According to Stephen Innes, managing partner of SPI Asset Management, “oil is trading marginally higher in highly illiquid holiday-type trade. Probably receiving some support from lower global interest rates.”
G7 and European Union officials have been debating a restriction on Russian oil prices. It is between $65 and $70 a barrel in order to prevent any disruptions to the world oil markets.
The possibility of Moscow retaliating is decreased since the market thinks (the price caps) excessively high. The president of Russia, has already stated that Moscow will stop supplying oil and gas to any nations who support the price ceiling. The Kremlin reaffirmed this position on Thursday. Trading is anticipated to remain cautious ahead of an agreement on the price ceiling, which is scheduled to take effect on December 5 when an EU ban on Russian oil goes into effect, and ahead of the upcoming OPEC+ summit on December 4.
The world’s biggest oil importer, China, is experiencing an increase in COVID-19 instances. This is beginning to have an impact on fuel demand, as evidenced by traffic declines and implied oil demand that is 1 million bpd below average at 13 million barrels per day. China on Friday continued to impose mobility restrictions and other constraints nationwide in an effort to contain outbreaks.
Russian oil replacement will be challenging but feasible at a greater cost. Note that although Canada, where I live, is fourth on the list, it has far greater oil reserves than Russia. If our own stupid Liberal government had allowed us to construct some pipelines to our east coast, we could actually export it to the EU. However, they have been persuaded by Russian and Saudi trolls that doing so would be bad, contribute to global warming, and prevent blizzards in April like the one that occurred earlier this week. We might even have summers lasting more than six weeks annually, which would be disastrous for Canada.