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HomeMarketOil Prices Rise as EU Talks on Russian Price Cap Inconclusive

Oil Prices Rise as EU Talks on Russian Price Cap Inconclusive

Oil prices are still on track for a weekly decline.

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Luke Sharrett/Bloomberg

Oil prices advanced on Friday after European Union leaders failed to agree on a price cap for Russian crude exports.

Officials were unable to settle on a level for the cap on Thursday. Under discussion was an upper limit between $65 a barrel and $70 a barrel. Some EU nations close to Ukraine felt that was too high because it would allow Russia to continue making profits. Others such as Greece and Malta, which have big shipping industries, argued it was too low. A low price could discourage Russia from exporting oil, reducing the volume of crude to be carried by tanker.

Brent crude, the international benchmark, climbed 1.5% to $86.64 a barrel on Friday. West Texas Intermediate, the U.S. standard, rose 1.7% to $79.66 a barrel. Trading volumes were low following the Thanksgiving holiday.

The price cap on exports of Russian crude, proposed by the Group of Seven countries, is intended to limit the country’s revenue from fuel sales after it invaded Ukraine earlier this year while allowing exports to continue. Prices spiked after the invasion because of concern that international sanctions against Russia would lead to shortages.

The EU is a member of the G-7, so the bloc needs to reach an internal agreement on the cap before it can take effect. Officials were hoping to an agreement this week, as an EU ban on oil imports from Russia takes effect on Dec. 5. The concern is that prices could rise for oil shipped to other destinations, such as China and India.

Prices are still heading for a third weekly decline on worries about the outlook for the global economy. China on Friday reported a daily record for Covid-19 infections, a sign that it will be further hampered by lockdowns to contain the disease. Combined with rising interest rates, demand for oil looks set to weaken over the winter. 

The Organization of the Petroleum Exporting Countries has already lowered production quotas to prop up oil prices. Its next meeting is scheduled for Dec. 4.

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