Oil rises on concerns over Chinese demand, high prices on G7

Oil rises on concerns over Chinese demand, high prices on G7

A view shows the Vostochny container port on the shore of Nakhodka Bay.

MELBOURNE Reuters -- Oil rose in early trade on Friday, trimping some of the week's losses due to concerns about Chinese demand and expectations for a high price cap on Russian oil planned by the Group of Seven G 7 nations.

The price of crude futures was up 13 cents, or 0.2%, to trade at $85.47 a barrel at 0121 GMT.

U.S. West Texas Intermediate WTI crude futures jumped 35 cents, or 0.5%, from Wednesday's close to $78.32 a barrel. On Thursday, there was no WTI settlement due to the U.S. Thanksgiving holiday.

Both contracts were on track for their third consecutive week decline, falling about 2% due to worries about tight supply easing.

G 7 and European Union diplomats have been discussing a price cap on Russian oil of between $65 and $70 a barrel with the aim of limiting revenue to fund Moscow's military offensive in Ukraine, without disrupting global oil markets.

The market considers the price caps too high, which reduces the risk of Moscow retaliating, ANZ Research analysts said in a note to clients.

Russian President Vladimir Putin said Moscow will not supply oil and gas to countries that join in imposing the price cap, which was reiterated on Thursday by the Kremlin.

ANZ also said there were signs that a surge in COVID 19 cases in China, the world's top oil importer, is starting to hit fuel demand, with traffic drifting down and implied oil demand around 13 million barrels per day, or 1 million barrels per day, or 1 million bpd lower than average.

This remains a headwind for oil demand, which is creating a negative backdrop for oil prices, ANZ said in a separate commodity note.

The price cap, due to come into effect on December 5 when an EU ban on Russian crude kicks off, and ahead of the next meeting of the Organization of the Petroleum Exporting Countries and allies, known as OPEC on December 4, is expected to be cautious.

Saudi Arabian Energy Minister Prince Abdulaziz bin Salman said this week that OPEC was ready to cut output if needed, and that it agreed in October to reduce its output target by 2 million barrels per day through 2023.