HOUSTON: Oil prices fell more than 4 per cent on Wednesday as the Group of Seven (G7) nations looked at a price cap on Russian oil above where it is currently trading and as gasoline inventories in the United States built by more than analysts’ expected.

Brent futures for January delivery fell $3.67 to $84.69 a barrel, a 4.2pc loss, by 11:07 a.m. ET (16:07 GMT). US crude fell $3.56, or 4.4pc, to $77.39 per barrel.

Both contracts had risen by over $1/bbl earlier in the session.

US gasoline stocks rose by 3.1 million barrels, according to the Energy Information Administ­ration. Analysts had estimated a build of 383,000 barrels.

“The build in gasoline is kind of a shock,” said Phil Flynn, an analyst at Price Futures group. “The increase in gasoline supplies suggests that maybe we’re seeing demand weakening or that gasoline is going on the rack ahead of the holidays.” EIA data also showed a 3.7 million barrel draw in Crude inventories, compared with analysts’ expectations in a Reuters poll for a 1.1 million-barrel drop.

Prices were also hit by reports that the G7 price cap on Russian oil could be above the level it is trading.

G7 nations are looking at a price cap on Russian seaborne oil in the range of $65-70/bbl, according to a European official on Wednesday.

Meanwhile, Urals crude delivered to northwest Europe URL-NWE-E is trading around $62-$63/bbl, although it is higher in the Mediterranean URL-E at around $67-$68/bbl, according to Refinitiv data.

Because production costs are estimated at around $20 per barrel, the cap would still make it profitable for Russia to sell its oil and in this way prevent a supply shortage on the global market.

Published in Dawn, November 24th, 2022