Oil futures: Crude prices slump 4% on Russian price cap talks
Quantum Commodity Intelligence - Crude oil futures Wednesday were sharply lower amid reports that the price ceiling imposed on Russian crude could be significantly higher than previously expected.
Front-month January ICE Brent futures were trading at $84.72/b (1740 GMT), compared to the earlier high of $89.56/b and Tuesday's settle of $88.36/b.
At the same time, Jan23 NYMEX WTI was trading $77.38/b versus a high of $81.95/b Tuesday's settle of $80.95/b.
According to newswire reports, EU officials are discussing a price cap in the $65-$70b, a substantial increase on the widely-touted $60/b that had been in play this week.
Analysts said that at the higher range, Russian barrels would price into Europe at around current levels once the steep discount for Urals is factored in.
Russia's response to any formal price cap has kept traders guessing, as Moscow continues to insist it will not do business within the terms of the cap, increasing the likelihood that overall exports will fall sharply.
However, the higher price ceiling for Russian crude sales into Europe could help maintain exports closer to current flows.
The latest EIA data largely took a back seat as US commercial crude inventories fell 3.7 million barrels last week.
Oil prices had found some early support after the American Petroleum Institute figures released late Tuesday revealed that US commercial crude inventories fell by 4.8 million barrels last week, against expectations of a 2-2.5-million-barrel drop. Gasoline stocks dipped by 400,000 barrels, while distillate inventories increased by 1.1 million barrels.
On the downside, Covid rates in China continue to spiral towards record highs, forcing widespread lockdowns and crushing hopes for an immediate economic rebound. The world's second-largest economy reported almost 28,000 new Covid cases on Tuesday, including ongoing outbreaks in Beijing and the manufacturing hub of Guangzhou.
"China is seeing a record level of lockdowns," said Ting Lu, chief China economist at Nomura. "It's even a bit worse than during the Shanghai lockdown because so many cities are partially locked down."