Oil price steadies ahead of Russian oil cap enactment, OPEC+ meeting

Oil future contracts changed a little bit during the choppy trading session on Friday ahead of the meeting of OPEC+ scheduled for Sunday and an EU ban on Russian crude which will come in force as of Monday, December 5.

WTI crude futures rose 11 cents, or 0.1%, to $81.35 per barrel and Brent crude futures were down 15 cents, or 0.2%, at $86.75 per barrel by 11:33 a.m. (1633 GMT).

Both contracts slid in and out of negative territory, but both were on track for their first weekly gains, the biggest in two months at around 4% and 7% respectively, after three consecutive weeks of drops.

Traders seem hesitant to be short over the weekend if there are growing rumours that OPEC might try to shock the market at their next meeting. OPEC+ is widely expected to stick to its latest target of reducing oil production by 2 million barrels per day on Sunday, but some analysts believe that crude prices could fall if the group does not make further cuts.

Crude oil carries significantly more weekend risk and could be extremely volatile on the open next week. Russian oil output could fall by 500,000 to 1 million bpd early in 2023 due to the European Union ban on seaborne imports from Monday, two sources at major Russian producers said.

EU governments hesitantly agreed on a $60 a barrel price cap on Russian seaborne oil with an adjustment mechanism to keep the cap at 5% below the market price, according to diplomats.

The cap, which was designed to limit revenues to Russia while not resulting in an oil price spike, still needs formal approval before the bloc’s sanctions on Russian crude kick in on Dec. 5.

Russian Urals crude traded at around $70 a barrel on Thursday afternoon. Sending bullish signals, China is expected to announce an easing of its COVID-19 quarantine protocols within days which could be a major shift in policy in the world’s second biggest oil consumer, although analysts warn a significant economic reopening is likely to be months away.

The US dollar, which typically trades inversely with oil, jumped after data showed that US employers added more jobs than expected in November while average hourly earnings also increased, potentially giving the Federal Reserve more incentive to raise interest rates.