Brent crude today touched as low as $85.80 but has since bounced to $87.17. It's near the September low and that's a big level with the OPEC meeting now three weeks away.
The weakness in crude today is curious but likely reflects worries about covid lockdowns and some technical selling.
The big question is what level the G7 will set. Previously, $60 has been floated and perhaps even lower. Russia is already selling oil at a decent discount to brent so I wouldn't rule out $50 or $55.
This decision is already way overdue because cargoes for December started booking a month ago and it takes effect on Dec 5.
The even bigger question is what Russia and its oil buyers will do. Russia has said they won't sell to anyone participating in the scheme and Yellen called that bluff but given what's happened in natural gas, I'm not so sure.
What is likely to happen is that Middle East countries import Russia oil for domestic use and export more of their own. For Saudi Arabia, that's an incredible arbitrage if you can buy $30 cheaper than you're selling.
So far, Russia oil is still getting out but a 1 or 2 mbpd decline would hurt the world market, especially with SPR sales ending. What I worry about even more is diesel as the European import ban comes into effect.
With all that, it certainly makes the latest dip in oil tempting.
