The Impact of the European Union’s Oil, The rise in oil prices is a result of industry data that showed U.S. crude stockpiles fell more sharply than expected last week.
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The Russian oil price cap
The EU’s Plan to Stabilize
The Russian oil price cap
With tensions running high between Iran and Saudi Arabia,
it remains to be seen how long this calm will last.
For now, though, it looks like oil prices are headed higher as traders bet on continued support from OPEC+.
Both benchmark contracts rose about 1% in the previous session as the United Arab Emirates, Kuwait, Iraq
and Algeria reinforced comments from Saudi Arabia’s energy minister that
the Organization of the Petroleum Exporting Countries (OPEC) and allies,
together called OPEC+, were not considering boosting oil output.
OPEC+ next meets to review output on Dec. 4.
The market had been jittery in recent days amid reports that some members of OPEC
were pushing for an increase in production due to fears that rising prices could hurt global economic growth.
However, it seems those concerns have been put to rest for now,
with Wednesday’s price action indicating that traders are confident
that OPEC will stick to its current production levels.
This highlights the supply tightness ahead of a looming
European Union bans and G7 price cap on Russian oil.
Brent crude futures gained 25 cents, or 0.3%, to $88.61 a barrel at 0101 GMT,
while US (WTI) crude futures rose 35 cents, or 0%.4%, to $81 .30 a barrel
The price cap on Russian oil is likely to see trade migrate to smaller businesses,
Vitol’s Chief Executive Officer Russell Hardy said at the FT Commodities Asia Summit.
The move would reduce market liquidity and increase costs for international oil companies (IOCs), he added.
Hardy’s comments come as Russia prepares to implement a new tax regime
which will see a ceiling placed on the export duties of crude oil and condensate from January 1, 2019.
The maximum duty will be set at $56 per tonne for crude and $48 per tonne for condensate.
The EU’s Plan to Stabilize
Quelling concerns that the cartel might increase output soon.
The European Union is confident that it will have its regulations in place
by December 5th, when a G7 plan to cap the price of Russian crude oil is set to go into effect.
This move would help stabilize global markets and protect consumers from sharp increases in fuel prices.
The EU has been working closely with Russia to ensure that this plan
can be implemented smoothly and without any disruptions.
Both sides are committed to ensuring that the transition is as seamless as possible.
This move will benefit both consumers and producers alike,
as it will help keep prices stable while still allowing for fair market competition.
It is yet another example of the EU working together with other countries to promote global economic stability.
Traders and investors are closely monitoring Russia’s exports considering recent tensions between the country and the West.
Many believe that if Russia were to trim its foreign sales in retaliation,
it could provide a boost to oil prices.
Inventories of U.S. crude fell by 4.8 million barrels last week,
according to data from the American Petroleum Institute,
which is seen as bullish for prices.
The EIA data showed that crude inventories fell by 1.6 million barrels
in the week to October 13, compared with analysts’ expectations for a 1.1-million-barrel drawdown.
On a bearish note, API data showed distillate stocks, which include heating oil and jet fuel,
rose by about 1.1 million barrels compared with analysts’ expectations for a drop of 600,000 barrels.
This is likely to weigh on oil prices in the near term as higher distillate stocks
could lead to lower demand for crude oil products.