Oil prices fell 2% on Friday amid weak market liquidity, closing a week marked by concerns over Chinese demand and negotiations over a Western price cap for Russian oil.
Brent crude futures settled down at $83.63 a barrel, down $1.71, or 2%, after some earlier gains.
West Texas Intermediate (WTI) crude futures were down $1.66, or 2.1%, at $76.28 a barrel. There was no WTI deal on Thursday due to the US Thanksgiving holiday and trading volumes remained low. Some of the gains were given up, as there was a slight volume after the holiday.
Both contracts recorded their third consecutive weekly decline after hitting 10-month lows this week. Brent closed the week down 4.6%, while WTI fell 4.7%.
The market structure of Brent and WTI implies that current demand is softening with the downturn defined by the front-month prices trading above the later delivery contracts that have weakened markedly in recent sessions.
For two-month spreads, Brent and WTI’s structures dipped into contango this week, meaning oversupply with short delivery contracts priced below subsequent deliveries.
China, the world’s largest oil importer, reported a new daily record for COVID-19 infections on Friday as cities across the country continue to impose travel measures and other restrictions to contain outbreaks.
Data showing reduced traffic and oil demand of around 1 million barrels per day lower than average show that COVID-19 is starting to hit fuel demand seriously.
Meanwhile, G7 and European Union diplomats are discussing limiting the Russian oil price to between $65 and $70 per barrel, but still, no agreement has been reached. EU diplomats said the meeting of European Union government representatives scheduled for Friday evening to discuss the proposal has been canceled. EU delays talks on Russian oil price cap until next week.
The aim is to limit the revenue that finances Moscow’s military offensive in Ukraine without disrupting global oil markets, but the proposed level is largely in line with what Asian buyers are currently paying.
Poland is seeking support from Germany to impose EU sanctions on the Polish-German section of the Druzhba crude oil pipeline so that Warsaw can abandon its agreement to purchase Russian oil next year without penalty, two sources familiar with the talks said.
Trade is expected to remain cautious ahead of an agreement on a price ceiling and the next meeting of the Organization of the Petroleum Exporting Countries and its allies on 4 December as an EU ban on Russian crude goes into effect on December 5th.
