The European Union is edging closer to setting a $60-per-barrel price cap on Russian oil — a highly anticipated and complex political and economic manoeuvre designed to keep Russia’s supplies flowing into global markets while clamping down on President Vladimir Putin’s ability to fund his war in Ukraine.
Victoria Scholar, head of investment at interactive investor, said: “The European Union reportedly has cautiously agreed to a $60 price cap on Russian oil with plans to adjust the cap so that it remains at 5% below the oil price. The next step is for the proposals to be approved by all EU governments.
“This week oil has been staging gains amid optimism towards the potential loosening of covid restrictions in China and the opening up of its economy at last, which could potentially unleash demand for crude oil from the world’s second largest economy.
“Meanwhile oil prices are trading modestly lower ahead of the OPEC+ meeting on Sunday. Analysts are divided on what the cartel will decide to do on 4th December. At its October meeting, OPEC+ cut its daily oil production by 2 million barrels per day to try to boost prices. A recent media report that the cartel was considering hiking production was quickly refuted by Saudi Arabia. Given this week’s rally, perhaps the cartel will hold off from doing anything at all until China’s demand trajectory becomes clearer.
After a surge in oil prices in the first quarter following Russia’s invasion of Ukraine, Brent crude has been slowly pushing lower since March. However, this week has finally brought about some more bullishness.”