DTN Oil

WASHINGTON, D.C. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled the first trading day of December mixed, with both crude benchmarks trimming earlier gains after Wall Street Journal reported European leaders reached a tentative agreement to cap the price of Russian oil exports at $60 bbl -- roughly matching the current price offered for Russian crude on the global market.

The roadblock to the agreement remains Poland that continued to insist on a below-market price cap within a $20 to $30 bbl range that could potentially result in large shut-ins in Russian oil production. The deadline for Poland to sign on to the agreement is reportedly set for 10 AM ET Friday.

There seem to be efforts at a compromise in the works to secure Poland's agreement in which the European Union puts more sanctions on Russia, including more banks and individuals, in exchange for Poland giving the green light for the cap at $60. If confirmed, the measure should lead to minimal disruption for Russian oil exports since it has little to no impact on the price formation mechanism for Russian crude. Urals, the Russian crude benchmark, is currently trading $23 bbl below Brent crude that settled Thursday session at $86.88 bbl. Russians were forced to offer steep discounts for its crude on the global market to lure in reluctant buyers in the aftermath of the Ukrainian offensive.

The price ceiling ultimately needs to be approved by all 27 EU member states, then G7 countries, before the measure can go into effect as planned on Dec. 5.

Complicating the picture, OPEC+ is set to agree this weekend on new production levels for January and beyond that could see the cartel keeping output unchanged or reducing output further as it attempts to offset demand losses in Asia and elsewhere. On Oct. 4, Saudi Arabia surprised the market with an agreement to cut oil production by 2 million bpd, drawing anger from EU and U.S. officials. Even so, oil prices weakened in November, with Brent crude falling to an $80.61 bbl nearly 11-month low on Monday as protests in China over COVID policies deteriorated the economic outlook for the world's largest oil importer. Last week, Saudi Energy Minister Prince Abdulaziz bin Salman said OPEC+ was "ready to intervene" with further supply reductions if it was required "to balance supply and demand."

At settlement, the West Texas Intermediate January contract advanced $0.67 to $81.22 bbl, and February Brent futures on ICE settled little changed at $86.88 bbl. January RBOB futures on NYMEX declined to $2.3420 gallon, down $0.0427, and January ULSD contract fell $0.1011 to $3.2624 gallon.

Liubov Georges can be reached at liubov.georges@dtn.com