(Bloomberg) -- Oil edged higher as traders waited for more details on a plan to cap Russian crude prices and weighed the demand outlook in virus-hit China.
West Texas Intermediate traded above $81 a barrel, after rising more than 1% the previous session as equities and other commodities also climbed. European Union ambassadors may meet later Wednesday to approve the plan after officials watered down a related package of sanctions. Russia has said that it won’t sell crude to nations that use the cap, which is designed to punish Moscow for its invasion of Ukraine while keeping the nation’s oil flowing.
“It’s looking as though it will be set not too far away from levels that Russia is currently receiving,” said Warren Patterson, head of commodities strategy at ING Groep NV. “If this is the case, I wouldn’t expect too much of a reaction from the market. I think it’s more important to see how Russia reacts.”
While there’s still little clarity on the price cap, the level is likely to be set at around $60 a barrel, Vitol CEO Russell Hardy said at the Financial Times Commodities Asia Summit in Singapore. Western banks and insurance companies won’t want to participate unless there’s absolute clarity that the sale price is below the limit, he said.
Crude prices have trended lower this month amid concern that demand in China, the world’s largest importer, will be hurt as the country presses on with Covid Zero curbs. Although officials are now taking a more targeted approach, a growing web of curbs means 48 cities are subject to some form of district-level or widespread movement restriction, according to Nomura Holdings Inc.
Supplies from the Organization of Petroleum Exporting Countries and allies have also been in focus, with members rejecting speculation that they may agree to increase output at their December meeting.
The industry-funded American Petroleum Institute, meanwhile, reported US inventories shrank 4.8 million barrels last week, according to people familiar with the figures. That included a drop at the key storage hub in Cushing, Oklahoma. Government figures on supply and demand follow later Wednesday.
Key market time spreads have been volatile in recent sessions. WTI’s prompt spread -- the difference between its two nearest contracts -- flipped into a bearish contango pattern on Friday and Monday. It was last at 24 cents a barrel in backwardation, the opposite bullish configuration.
(Source : Bloomberg) , all rights reserved by original source.