Oil trickled down on Thursday, hovering around two-month lows, as the proposed price cap on Russian oil from Group of Seven (G7) nations was considered higher than the current trading levels, alleviating concerns over tight supply.
A greater-than-expected build in U.S. gasoline inventories and widening COVID controls in China added to downward pressure.
Brent crude futures dipped 21 cents, or 0.3%, to $85.20 a barrel by 0431 GMT, while U.S. West Texas Intermediate (WTI) crude futures fell by 16 cents, or 0.2%, to $77.78 a barrel.
Both benchmarks plunged more than 3% on Wednesday on news the planned price cap on Russian oil could be above the current market level.
The G7 is looking at a cap on Russian seaborne oil at $65-$70 a barrel, according to a European official, though European Union governments have not yet agreed on a price.
The range of $65‑$70 would be higher than markets had expected, Commonwealth Bank commodities analyst Vivek Dhar said in a report. It would reduce the risk of global supply being disrupted, Dhar said.
“If the EU agree to an oil price cap of $65‑$70/bbl this week, we see downside risks to our oil price forecast of $95/bbl this quarter,” Dhar said.
Commonwealth Bank’s forecast assumed EU sanctions accompanied by a price cap on Russian oil would disrupt enough supply to offset ongoing global growth concerns, he said.
Some Indian and Chinese refiners are paying prices below the proposed price cap level for Urals crude, traders said.