Oil tumbled again as the EU discussed imposing a price cap on Russian oil between $65 and $70 a barrel, a level that could help keep the nation’s supplies flowing into the global market.
West Texas Intermediate dropped below $80 a barrel, extending a recent run of recent volatility that on Monday pushed prices to the lowest since January. The proposed cap level could be close to the current Russian oil prices given it has been trading at discounts of about $20 a barrel in recent months, representing a minimal hit to trade.
Russia has previously 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.
“At current price levels, the plan seems ineffective,” PVM Oil Associates analysts Tamas Varga and Stephen Brennock wrote in a note, referring to the price cap. “It will be crucial to see the details of the proposed cap to evaluate the price impact of it.”
Crude prices have suffered several sharp downturns in recent days as the market for real-world barrels has softened markedly. Demand in China, the world’s largest importer, continues to suffer as the country presses on with Covid Zero curbs. Beijing asked residents not to leave the city unless necessary, to curb the spread of the virus.
- WTI for January delivery dropped 2.2 per cent to $79.17 a barrel at 7:29 a.m. in New York.
- Brent for January settlement slid 2.4 per cent to $86.22 a barrel.
EU ambassadors are meeting on Wednesday with the aim of approving the cap mechanism and a proposed price level. On Tuesday, the European Union already watered down its latest sanctions proposal by delaying its full implementation and softening key shipping provisions.
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