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dated: 2022-11-25 06:24:11 .
(Bloomberg) — Oil headed for a third weekly loss as the European Union set a higher-than-expected price cap for Russian crude and fears of a slowdown weighed on the outlook for demand.
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Brent traded below $86 a barrel, putting the global benchmark on course for a more than 2% drop this week. European diplomats remain engrossed in talks over how strict the cap should be, pointing to disagreements among member states. Talks could resume on Friday, but could go beyond that.
Signs of demand challenges have piled up. In China, the world’s biggest oil importer, daily Covid infections hit a record this week, prompting officials to tighten restrictions. Meanwhile, the Institute of International Finance predicts the global economy will be as weak next year as it was after the 2009 financial crisis as the conflict in Ukraine drags on.
Crude oil fell this month, erasing gains made in October after the Organization of the Petroleum Exporting Countries and allies agreed to cut production. In a sign of the group’s stance ahead of their meeting next month, Iraqi Oil Minister Hayyan Abdul Ghani backed the coalition and signaled he would coordinate positions with de facto leader Saudi Arabia.
“Crude oil has struggled with bearish factors since recent sessions on recession fears and rising Covid cases in China,” said Ravindra Rao, head of commodity research at Kotak Securities Ltd. in Bombay. “Limiting the price of Russian oil between 65 and 70 dollars will not have a big impact,” because it is already trading at those levels, he added.
Widespread divergence signals a weaker market, with WTI’s rapid expansion into contango a pattern that suggests abundant supply in the near term. The difference was 12 cents a barrel compared to 80 cents in the opposite bullish retracement structure two weeks ago. The Brent spread narrowed to 7 cents a barrel back from $1.58 two weeks ago.
The price cap plan is part of a response by the EU and the Group of Seven to punish President Vladimir Putin for invading Ukraine by cutting Moscow’s revenues while allowing other countries to continue importing. The introduction of restrictions by Western countries will have a “high probability” of a negative impact on the energy market, Putin said.
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Oil poised for third weekly loss on price cap impasse, demand fears
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