Oil posted a third weekly loss as the European Union (EU) suspended talks over a Russian oil price cap amid disagreements between member states.
West Texas Intermediate futures falls 2.1% to settle at $76.28 a barrel after trading in a more than $3 range. European diplomats remain locked in talks over how strict the cap should be, having previously proposed a range of $65-$70. Poland and the Baltics felt the cap was too generous to Russia.
The cap talks come before an Ooec+ meeting early next month. Iraq and Saudi Arabia’s oil ministers met and said the group could take further measures if required to achieve stability in the market.
Crude has declined in November, overturning the gains made in October after the Organisation of Petroleum Exporting Countries and allies agreed to reduce production. Mounting headwinds to crude demand have stemmed from China’s tighter economic lockdowns and fears of a US recession.
“Our balances point to slight oversupply until the end of Q1,” Morgan Stanley analysts including Martijn Rats and Amy Sergeant said in a note to clients. “For now, the oil market is faced with macroeconomic headwinds.”
The price-cap plan forms part of the efforts by the EU and the Group of Seven to punish President Vladimir Putin for the invasion of Ukraine by reducing Moscow’s revenue, while at the same time allowing other states to continue imports. The introduction of a cap by western countries will “with high probability” have a negative effect on the energy market, Putin said.