A combination of climbing Covid infections in China, uncertainty about the G7 oil price cap, and a build in U.S. oil inventories pushed oil prices lower this week. While oil prices did climb early on Friday morning, the build-up of bearish sentiment is palpable. China’s daily recorded Covid-19 cases hit an all-time high this week, surging above 31,000, with Henan and Guangdong moving back into lockdown mode while Beijing residents were put under the strictest restrictions since the onset of the pandemic. 

With the oil price cap set to come into effect in just 10 days, the oil markets are desperately awaiting any clarification on the price limit’s actual details. The European Union convened to align on a joint oil price cap, but talks broke down as members failed to agree on the best price point. Media reports suggest the G7-proposed oil price cap level would be in the range of 65-70 per barrel, substantially higher than initially assumed. Coupled with China’s COVID meltdown and US inventory builds, this news has pushed oil prices lower over the week.