Oil falls marginally as supply-disruption fears ease amid Russian price cap talks

Both benchmark contracts plunged more than 3 percent on Wednesday on news that the planned price cap could be above the current market level.

The G7 is looking at a cap on Russian seaborne oil in the range of $65-70/bbl, according to a European official, though European Union governments have not yet agreed with each other on the matter.

The range of $65‑70/bbl 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, adding that the forecast assumed EU sanctions accompanied by a price cap on Russian oil would disrupt enough supply to offset ongoing global growth concerns.

EU governments will resume talks on Thursday evening or on Friday, according to EU diplomats.

Oil prices also came under downward pressure after the Energy Information Administration (EIA) said on Wednesday that US gasoline and distillate inventories had both risen substantially last week. The increase alleviated some concern about market tightness.

But crude inventories fell by 3.7 million barrels in the week to Nov. 18 to 431.7 million barrels, compared with analysts' expectations in a Reuters poll for a 1.1 million-barrel drop.

"Crude market is at extremely high lows and all the bias on crude is on the upside," Arvind Sanger, Geosphere Capital Management On CNBC-TV18.

Meanwhile, Chevron Corp could soon win US approval to expand operations in Venezuela and resume trading its oil once the Venezuelan government and its opposition resume political talks, four people familiar with the matter said on Wednesday.

Both Venezuelan parties and US officials are pushing to hold talks in Mexico City this weekend, the people said. They would be the first such talks since October 2021 and could pave the way for easing US oil sanctions on the OPEC nation.

Also pressuring oil prices lower, Chinese cities imposed more curbs on Wednesday to rein in rising coronavirus cases, adding to investor worries about the economy and fuel demand.