The European Union postpones the Russian oil price limit negotiations, and the time for the next change in oil prices is approaching

It is reported that due to internal disagreements, the European Union postponed negotiations on the Russian oil price ceiling, and the influence of the supply side is declining, but the next key node in oil prices is coming soon.

EU talks on Russian oil price cap delayed

On Thursday (November 24), according to the US "Wall Street Journal", European diplomats are negotiating a mechanism aimed at suppressing Russian oil revenue. However, because the G7 hopes to set the upward price of oil to Russia in the range of 65-70 US dollars, this has caused differences among EU countries. As of the time of writing, the relevant agreement is still under negotiation.

According to market sources, Poland and its Baltic neighbors want a lower upside price, insisting on a price of $30 a barrel. And countries such as Greece, Cyprus and Malta, which have huge shipping industries, do not want oil prices below $70, and some countries even demand compensation for the loss of income that their maritime operations may suffer. In addition, Hungary's foreign minister said on Thursday (November 24) that during negotiations in Brussels, Hungary received immunity from Russia's oil price cap.

Facing the "chaotic" situation in the EU, Russian Foreign Ministry spokesperson Zakharova said on Thursday (November 24) that the EU's attempt to limit the price of Russian energy products is a disruption to the global trading system and has opened a dangerous crisis in the energy market. precedent. In addition, Russia has recently repeatedly emphasized that it will not provide oil and gas to countries that support price ceilings.

There is no doubt that the G7 and the European Union are facing an awkward situation. On the one hand, they want to limit the revenue that Russia can get from selling oil, but at the same time, they want Russia to keep the oil flowing and prevent global prices from soaring. More importantly, OPEC+ members led by Saudi Arabia expressed their support for Russia in the form of a production cut of 2 million barrels per day at the October meeting.

In fact, since Russia has already sold crude oil at a discount to the Asian region, the oil price ceiling of $65-75 has little impact on Russian oil transactions. And once the G7 upper limit price "lands", Russia will probably not sell oil to the G7 countries. The final result may be that the EU still needs to spend more to import Russian oil from other countries. It is undoubtedly worse.

In any case, with global inflation remaining high and the global financial crisis highlighted, problems on the oil supply side are expected to be "significantly alleviated." The final plan formulated by the G7 will pay more attention to whether Russia maintains production rather than oil revenue, so the support for oil prices may gradually decrease.

Outlook

Although the impact on the supply side has shrunk, the European Union's oil embargo against Russia on December 5 is still the focus of the crude oil market, and we need to be alert to the possibility of an accelerated decline in oil prices before the December 5 node. In addition, the OPEC+ ministerial meeting will usher in on December 4, and crude oil will usher in a time window for changes.

From a medium-term perspective, the direction of least resistance for oil prices is still downward, and in the medium term it is still expected to fall further to the support around $65. However, considering that the U.S. strategic oil reserve will be replenished below $70, it is expected that the sharp downside of U.S. crude oil will be limited.