DAILY BRIEF: OIL

RROM：Bloomberg

Oil tumbled again as the EU discussed imposing a price cap on Russian oil between $65 and $70 /bbl, a level that could help keep the nation’s supplies flowing into the global market. WTI  dropped below $80/bbl, extending a recent run of recent volatility that on Monday pushed prices to the lowest since January. The proposed cap level could be close to the current Russian oil prices given it has been trading at discounts of about $20 a barrel in recent months, representing a minimal hit to trade.

      Commodities trading giant Trafigura is working on deals to supply Europe with fuel once  deliveries from Russia are all but cut off early next year. The company has played a pivotal role  in supplying middle distillates -- industry jargon for jet and diesel-type fuels -- into continental Europe over the last year, through both term contracts and spot cargoes, a spokesperson said in response to emailed questions from Bloomberg.

Goldman's Jeff Currie sees uncertainty before a bullish Spring. The bank has retained its $115/bbl price target for next year, expecting China to put upward pressure on commodities when it emerges from Covid lockdowns. "It's a game changer" when China reopens, he said. "But what    happens between now and next Spring -- that part is highly uncertain."

      OPEC+ will stick with its current oil targets, said Standard Chartered.“As the data stands today, we think the optimal strategy for ministers is to continue with current targets at the next meeting and await further information on Russian supply,” analysts including Paul Horsnell wrote. Alternatively, OPEC+ may make case forpre-emptive output cut if Russian supply looks set to beat expectations, and demand to disappoint. In terms of an increase, oil markets could absorb a modest supply gain but have little scope for any more.

Mild weather across Europe in recent weeks is setting the region up to avoid a natural gas shortage for winter this year and next, according to Trafigura Group, one of the world’s biggest commodity traders. Europe’s gas inventories are likely to drain by roughly two-thirds this winter, provided there’s regular weather and Russian flows continue through Ukraine, said Trafigura CEO Jeremy Weir. That means the region will be able to survive the upcoming winter period, and could have enough of a fuel buffer to help avoid a crunch next year too, he added.

Top trader Vitol is still buying“very modest”volumes of Russian oil products and is studying whether the company will be able to keep doing so as more sanctions come into force. The    trading in Russian energy now makes up a“low-single digit percentage” of Vitol’s business,  compared with 10% prior to the invasion of Ukraine, CEO Russell Hardy said in an interview.  The company no longer deals with crude from the OPEC+ producer, only refined products.

The biggest oil ETF posted its largest influx of cash since March as benchmark crude prices plunged in recent days. The US Oil Fund pulled in almost $160 million on Friday, a day when    futures were down by more than $4/bbl at one stage. Since then, the market has gone up slightly. The $2.9 billion ETF also saw the highest trading volumes since March on Monday,  when West Texas Intermediate shed as much as $5 intraday. The level of inflows or outflows for Monday aren’t yet known.

BP abandoned a plan to restart operations at its biggest refinery in Europe this week after  workers at the plant started strike action.“The planned restart has been put on hold and  operations at the refinery remain shut down,” the company said in emailed response to  questions. It regrets the decision to proceed with industrial action and remains in talks with the unions, it said. In addition to the labor dispute, BP is also working to resolve a fault at the plant, which prompted it to cease fuel-making operations last week. That issue could take more than a week to resolve, according to a person familiar with the matter.